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Morning markets: China corn futures gain, even as US markets sleep

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A big week for ag markets started on a muted note.

 

The days ahead (besides being Agrimoney week) will bring a series of much-watched monthly data reports, from the likes of Brazil’s Conab ag bureau, the Malaysian Palm Oil Board and, the main event, the US Department of Agriculture Wasde briefing.

 

However, the week is going to work its way up to Wasde, and starts off indeed with a holiday, Labor Day in the US, with the likes of Canada and Brazil holding breaks too.

 

Some official Australian crop data is due on Tuesday Aussie time (ie later on Monday for many of us).

 

And in early deals on Monday, what ag markets were open broadly proved little changed.

 

Palm flat

Palm oil futures were flat at 2,835 ringgit a tonne in Kuala Lumpur as of 09:30 UK time (03:30 Chicago time), ahead of Thursday’s MPOB briefing which is expected to show Malaysian stocks of the vegetable oil growing by 5.4% month on month over August, according to a Reuters poll.

 

But might the growth be even larger?

 

According to the Malaysian Palm Oil Association, Malaysian production of the vegetable oil last month grew by 3.8% from July to 1.87m tonnes.

 

This was a little ahead of a poll result of 2% growth to 1.84m tonnes, and contrasted with comments too from the likes of Oil World of weak Malaysian output last month.

 

Dalian decline

Not that all the data on palm oil was so discouraging, with Intertek Testing Services reporting a strong start to September for Malaysian exports of the vegetable oil, apparently up 33% month on month over the first five days.

 

However, that is but a small period.

 

Less positive for Kuala Lumpur prices, palm oil futures on the Dalian exchange in key importer China fell by 1.0% to 5,854 yuan a tonne for January delivery, and are now 3.1% below Thursday’s contract high.

 

Also, Brent crude for November, a key influence for ags such as palm oil used in making biofuels, fell by 1.2% to $42.13 a barrel, after Saudi Arabia cut the price of its oil exports.

 

Buoyant corn

However, not all ag markets open on Monday succumbed to gravity.

 

Back on the Dalian, soymeal for January gained 1.3% to 2,987 yuan a tonne, for its best finish in six weeks, after data showed a decline of 490,000 tonnes month on month, to 9.60m tonnes, in Chinese soybean imports.

 

And, in what will ring particularly loud in Western grain markets, Dalian corn futures for January jumped 1.5% to 2,326 yuan a tonne, setting a contract closing high for the first time in three weeks.

 

Chinese corn prices are under close watch for signs that the country may be facing a bigger squeeze on supplies than officials have suggested, potentially meaning huge import needs.

 

‘Could be a big number’

“Trade is closely monitoring China’s corn buying activity,” said Karl Setzer at AgriVisor.

 

On imports, “this could potentially be a big number. The thought being thrown out is that they may need up to 50m tonnes,” said John Walsh at Walsh Trading, if repeating what is very much a top-of-the-range forecast.

 

Still, even China’s ag ministry sees a 16.7m-tonne domestic corn production shortfall in 2020-21, with a Reuters story putting it at 30m tonnes, even factoring in a record harvest of 266.5m tonnes.

 

Whatever, with the “current stress in relationships with many trading partners the big rethink is going on over there” in China, said Benson Quinn Commodities.

 

“Carrying larger carryover stocks may not be a bad plan in the long run.

 

“Remember, China never do anything by half and when they whiff it usually involves large numbers.”

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