Was there a reversal of enter equities-exit ags switching going on?
Earlier on Friday, Karl Setzer at Agrivisor bemoaned “the lack of investor interest” in commodities.
“We are seeing much more interest in the financials and currency market, and that is taking investor interest away from commodities.
“Traders are growing tired of hashing the same fundamental news over and over, and are instead looking for places where they have the opportunity for revenue generation.”
Shares vs ags
But ags were very much more in favour by the end of the day, which saw shares under the cosh, with Wall Street stocks down 0.4% in late deals.
Earlier, London’s FTSE 100 index ended down 0.9%, while Tokyo’s Nikkei dropped 0.5%, and Hong Kong’s Hang Seng tumbled by 2.0%.
Brent crude tumbled by 2.3% to $62.42 a barrel in late trading.
Meanwhile, the Bcom ag index stood up 0.8%, returning back above its 50-day moving average.
‘Firm counter measures’
OK, not all ags were in favour.
A big reason behind the drop in shares was a “deal-off” mentality, ie ideas that a China-US trade accord was now further away, after US President Donald Trump signed into law a bill backing Hong Kong’s anti-government demonstrators.
The move, which drew a warning of "firm counter measures" from Beijing, did undermine prices of ags particularly exposed to US-China trade.
Soybean futures for January ended down 0.6% at $8.76 ¾ a bushel, their weakest finish in getting on for three months, and a seventh successive negative close.
(So much for the seasonal trade of going long in soybeans around US Thanksgiving.)
The drop in soybean prices came despite some US export sales data for the oilseed deemed “very strong” by Benson Quinn Commodities, at 1.66m tonnes last week, ahead of market expectations of a figure of 600,000-1.20m tonnes.
(China was responsible for about half.)
Actual shipments last week were especially strong, at 2.25m tonnes – a nine-month high, and ahead of the 1.94m tonnes indicated by cargo inspection data released earlier in the week.
Cotton, another ag particularly exposed to US-China trade, also fell, by 0.7% to 65.36 cents a pound in New York for March delivery.
And again, US export sales data wasn’t bad, at 281,514 running bales for upland cotton, the third best reading of 2019-20 so far.
Actual exports of 184,438 running bales were the best in nearly three months.
Commonwealth Bank of Australia did not help by issuing a somewhat downbeat forecast for cotton prices.
However, back in Chicago, soft red winter wheat put on a bravura performance, adding 2.9% to $5.41 ¾ a bushel for March delivery, a five-month closing high for a nearest-but-one contract.
The weak, ie zero, deliveries against the expiring December contract were a help, if not that unexpected, with the contract’s strength over the last couple of weeks attributed at least in part to the dearth of supplies certified for putting against futures.
But decent US export sales data for last week helped too.
At 612,655 tonnes, they were the strongest in three months, and ahead of the range of 300,000-600,000 tonnes expected by investors.
French, UK delays
Also supportive was an upbeat forecast by CBA for wheat prices, besides the waning ideas of Russian supplies.
Russia’s agriculture ministry earlier this week downgraded its 2019 wheat crop forecast by 3m tonnes to 75m tonnes, while the country’s exports so far in 2019-20 are running 11% below year ago levels, at 18.4m tonnes as of Tuesday.
Furthermore, there was further evidence of the difficulties facing farmers in France, the European Union’s top wheat growers.
Their sowings of soft winter wheat as of Monday were, at 80% complete, up 6 points week on week, but well below the average level of 99% by then.
And the condition of the crop, down 3 points week on week at 75% good or excellent, was the weakest for this time of year on data going back to 2012.
This after data for the UK showed an anticipated 13% fall in UK winter wheat planting for the 2020 harvest, also thanks to wet weather which has prevented fieldwork.
Paris soft wheat futures for March themselves closed up 1.1% at E185.75 a tonne, a four-month closing high.
Back in the US, Kansas City hard red winter wheat futures for March ended up 2.2% at $4.47 ¼ a bushel, also helped by a low level of deliveries (11 contracts) against the expiring December lot, although with US export data for this particular class not so hot, at 143,372 tonnes.
That was in fact down nearly 100,000 tonnes week on week.
Spring wheat was the star performer, with US export sales last week of 226,775 tonnes, the most in three months.
Still, with higher deliveries, of more than 300 lots, the Minneapolis spring wheat futures for March lagged in adding 1.2% to $5.14 ½ a bushel.
“I am not convinced there was a good stopper in Minneapolis” either, to pick up these volumes, Benson Quinn Commodities said.
Corn did better than that, gaining 2.1% to $3.81 ¼ a bushel in Chicago for March, helped by rival grain wheat but also by its own US export data, which was decent, for once.
At 806,800 tonnes, it was the best in two months, and towards the top end of the range of 400,000-900,000 tonnes that investors had expected.
Forecast for heavy snows in the north west US Corn Belt also helped, in supporting ideas that growers will be forced to leave crop in the field through winter, with the risk that entails (to quality and quantity) besides to timely spring sowings.