The hopes around earlier that relations between the US and China were not as bad as had been feared waned, injecting a bit of a risk-on feel into markets.
Shares fell by 0.4% in late trading in New York, as China failed to confirm that it had, as US President Donald Trump had said, called and engendered the idea that “they want to make a deal”.
It had become “clear no phone call actually took place but instead Chinese Vice-Premier Liu told a business conference that they were ‘willing to resolve the issue through consultation and cooperation with a calm attitude’,” said Tregg Cronin ag Halo Commodity Company.
Sentiment was little helped either by a red signal flashing from the bond markets, where shorter-dated Treasury yields eclipsed those for longer-dated ones.
The spread between the 10-year bond and the two-year fell to minus 5.16 basis points, reportedly the most negative since 2007, and potentially sign of stormy economic weather ahead.
Richard Feltes at RJ O’Brien said that the “overall commodity backdrop remains negative against a backdrop of slowing global growth, a strong dollar, low inflation and down-sloping crude market since mid-July”.
‘Weather leans negative’
On ag markets, soybeans, particularly sensitive to US-China trade, closed down 1.0% at $8.59 ¼ a bushel in Chicago for November delivery, weighed also by a larger-than-expected increase in the US crop condition figure.
The US Department of Agriculture rated the US soybean crop at 55% good or excellent as of Sunday, up 2 points week on week, ahead of the 1-point increase expected by investors.
And conditions are benign for Midwest crops for now, with Maxar saying that “rains in central areas yesterday improved moisture, and rains in western areas late week will further improve moisture there as well”.
“Weather leans negative” for prices was how RJ O’Brien’s Richard Feltes at saw the outlook, also noting ideas from Commodity Weather Group that the risk of Midwest frost is “limited through late September”, cutting the chances of a premature end to a growing season already curtailed at the front end by delayed sowings.
‘Benefiting from rain events’
Corn ended lower too, by 0.6% at $3.66 ¼ a bushel for December delivery, a contract closing low, also weighed by the decent Midwest growing conditions, as well as spillover pressure from soybeans.
CHS Hedging said it was “being told the crop is benefiting from the rain events moving across the upper Midwest”, although noted too that it “still has a long way to go before maturity”.
Dr Michael Cordonnier at Soybean and Corn Advisor hardly helped by raising his corn production estimate by 2 bushels per acre to 162 bushels per acre, lifting his production figure to 13.04bn bushels, although these numbers remain of course well below those of the USDA.
There seemed to be some spreading on corn-Kansas City hard red winter wheat going on too, with the latter ending up 0.7% at $4.04 ¾ a bushel for December, without apparent cause for buying beyond the release of pressure as the northern hemisphere harvest winds down.
Still, it was helpful too that Paris wheat for December added 0.3% to E170.75 a tonne, after French wheat won a rare order, of 60,000 tonnes, at a tender by Egypt’s Gasc, the first indeed in six months.
(Most of the order still went to Black Sea origin, with 60,000 tonnes of Ukrainian and 230,000 tonnes of Russian.)
Chicago soft red winter wheat for December added 0.8% to $4.05 ¼ a bushel.
In New York, cotton futures bucked their fellow row crops by ending higher, reflecting the divergence in US crop condition.
While US corn and soybean ratings grew last week, the USDA said that US cotton ratings dropped by 6 points, completing the worst fortnight for ratings in 24 years, as dryness stresses crops in the key growing state of Texas.
Furthermore, there is a watch on Tropical Storm Dorian, currently around Puerto Rico, but which could touch the south east US later in the week.
Still, with worries over US-China relations highly relevant to cotton, New York December futures ended up a modest 0.2% at 57.92 cents a pound.
‘Doomed to stay low?’
But New York raw sugar futures for October dropped by 1.8% to 11.24 cents a pound, a 10-month closing low for a spot contract, undermined by weakness in the Brazilian real, but also by worries over the extent of Indian supplies.
Marex Spectron, noting talk of continued Indian government commitment to export subsidies in some form or another, saying that if that indeed is true, it “is showing that the world’s largest producer is intent on keeping production well above consumption, even with the world price is as low as it is today.
“Therefore… India will be a considerable exporter for the foreseeable future, with their export tonnage increasing if/when the world price increases.”
So are sugar prices “doomed to stay low for another year? Unfortunately, it looks that way.”
Arabica coffee futures also felt pressure from the real, to end down 0.4% at 97.15 cents a pound for December – although this was after a marked rise on Monday, amid worries over Brazil’s 2020 crop, fears backed in a statement from 19 coffee co-operatives.
London robusta coffee for November jumped 1.9% to $1,339 a tonne, playing catch-up after trading was closed on Monday for a UK holiday.