Just as it seemed a Santa rally might be on the cards, the Twittersphere delivered something less than festive cheer to market bulls.
US President Donald Trump, even though still fighting a trade war with China, turned back to another front.
“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers,” Mr Trump tweeted.
“Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the US from those countries.”
He added that the Federal Reserve should also act so that “countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies,” a factor which “makes it very hard for our manufactures & farmers to fairly export their goods”.
“Lower Rates & Loosen – Fed,” the president said.
And the dollar actually did ease back 0.4% against a basket of currencies, falling below a bunch of moving averages, and losing ground in fact against currencies including Brazil’s real which, after an early fall, rebounded helped by a successful spot auction by the country’s own central bank.
Still, if a weaker dollar is positive for values of dollar-denominated exports such as many agricultural commodities, making them more affordable to buyers in other currencies, that was not reflected in higher grain prices.
There was a bit of a risk-off feel after Mr Trump’s comments, with Wall Street shares down 0.7% in late deals.
Sentiment was also dented by data showing that the US manufacturing sector contracted at a slightly faster rate in November, defying expectations of some recovery, and representing a fourth successive month of shrinkage.
By contrast, both ag and share markets earlier had taken some support from Chinese data showing its manufacturing sector expanded at its fastest pace in nearly three years last month, with the Caixin-Markit purchasing managers’ index hitting 51.8, up 0.1 points from October.
Wheat - the one significant US ag export to Brazil, so vulnerable to any retaliatory – performed notably badly, ending down 0.7% at $5.35 ¼ a bushel in Chicago in late deals.
In fact, Kansas City hard red winter wheat, the US type that Brazilian importers are most fond of, fared worse, dropping 1.7% to $4.39 ¼ a bushel for March, although remaining just above a clutch of moving averages.
Another headwind to prices was weak US export data anyway for last week, at 246,988 tonnes, below the range of 400,000-600,000 tonnes that investors had expected, and down nearly 190,000 tonnes week on week.
Wheat futures had earlier on found some support from the range of weather challenges facing crops, including the wetness which has hampered winter sowings in France and the UK, and the dryness which prompted Abares again to cut its estimate for the ongoing Australian harvest.
“Weather problems in Argentina and Australia may force Asian buyers to turn to Black Sea and US supplies, said Terry Reilly at Futures International.
Soybean futures struggled too in Chicago, shedding 0.5% to $8.70 ½ a bushel for January, an eighth successive negative session, and a six-month closing low.
US export data for last week were not that hot for the oilseed either, coming in at 1.55m tonnes, down 400,000 tonnes week on week, although at least within the range of market expectations of 1.40m-2.00m tonnes.
Also negative for soybeans was a tumble in soyoil, which dropped 1.2% to 30.16 cents a pound for January delivery, in turn undermined by some weakness in rival palm oil, which eased 0.5% to 2,731 ringgit a tonne in Kuala Lumpur, and some worries over US demand.
As reported earlier, the US EIA put US biodiesel production in September at 142m gallons, down 14m gallons month on month, with use of soyoil in making the biofuel at 599m pounds, a drop of 102m pounds month on month.
‘Uptrend in feed demand’
For corn, US export data for last week were soft too, at 428,856 tonnes, down nearly 190,000 tonnes week on week, and below market forecasts pitched at 500,000-700,000 tonnes.
Still, at least the University of Illinois had some positive comments for US demand, saying that “after a dismal performance in September and October, corn demand showed signs of life in November”, with both ethanol output and export sales picking up the pace over the last few weeks”.
“Expanded placements and higher weights in the livestock sector point toward the potential for an uptrend in feed demand.
“Corn use appears set to maintain this momentum as we move toward 2020.”
Furthermore, Benson Quinn Commodities noted that US basis “continues strong, at or near historic highs.
“The producer is still struggling to harvest the remains of the 2019 crop with heavy snows last week across the upper Midwest ending the harvest season for some.”
Indeed, Maxar reported that “heavy snowfall favoured the northern Plains and far northern Midwest over the weekend, with amounts of 8-16 inches (20-40 cm) reported across much of South Dakota, south eastern North Dakota, northern Minnesota, and northern Wisconsin.
“The deep snow cover in these areas will prevent remaining corn and soybean harvesting and in some cases crops may not be harvested until next spring, particularly in North Dakota”.
While drier weather in the central US this week “will favour fieldwork”, this comes “with the exception of the northern Plains and northern Midwest, where snow cover will remain in place”.
Chicago corn futures for March closed up 0.2% at $3.82 a bushel.
‘Overall, it remains dry’
Among soft commodities, New York arabica coffee for March finished up too, and by a healthy 2.5% at 122.00 cents a pound, which few expectations that Mr Trump would impose import tariffs on buy-ins from the top exporting country of a commodity that the US does not produce itself.
At Price Futures, Jack Scoville reported that “rains were reported in Brazil Coffee areas to help ideas of big production in the coming year, but overall it remains dry.
“It is dry in other parts of Latin America as well. Central America has had less than normal rains, especially in Honduras where a large part of the deliverable stocks come from. Peru is also too dry right now.”
Furthermore, he noted that in Brazil, “some exporters say they are out of previous crop supplies to sell” after a smaller 2018 harvest.
However, New York raw sugar for March shed 1.5% to 12.75 cents a pound.
While weekly Commodity Futures Trading Committee data on investor positioning in commodities was delayed from Friday, by Thanksgiving, “it is obvious that the funds will have continued to buy back their shorts, so their net short position is now likely to be well below 100,000 lots,” said Marex Spectron.
Substantial fund short-covering can be considered a negative for prices, in meaning that substantial buying pressure has already been released through the market.