A virus-on/risk-off feel was abroad on financial markets, with Asian shares taking their cue from Wall Street overnight, when the S&P 500 closed down 3.4%.
Tokyo’s Nikkei ended down 2.7% on Friday, Hong Kong stocks closed down 2.3%, and Shanghai shares 1.2%.
London shares stood 1.4% lower in early deals, while also (as in the normal drill in these circumstances), Brent crude was down, by 1.7% at $49.16 a barrel, and gold higher, albeit by a relatively modest 0.4% at $1,677 per ounce.
It was probably not a help that it was the last trading day of the week, with the prospect of markets being closed for two days, but the newsflow continued unchecked, tending to produce a defensive reaction.
“We have a weekend coming up,” Mike Mawdsley at First Choice Commodities said, noting that this was cause for investors to mull whether “something more dire happens over the weekend”.
Among agricultural commodities, it was not such a surprise that cotton - as an industrial ag (ie more exposed than food ags to economic worries) in which speculators have kept a net long position, as of Tuesday last week – was among weaker performers.
The New York May cotton lot shed 0.4% to 63.09 cents a pound as of 09:20 UK time (03:20 Chicago time), losing the shield provided in the last session by US export sales data for the week to February 27 which, as Louis Rose at Rose Commodity Group said, were “simply outstanding”.
For upland cotton, sales of 395,505 running bales were the strongest in two years, with actual exports of 478,193 running bales representing a 23-month high.
Less positively for futures, data overnight showed a sharp drop in mills’ on-call commitments against particularly the nearer-term cotton contracts, as they fixed pricing at lower levels (cutting the chance of a price spike to come as mills are squeezed approaching lot expiry).
“Mill commitments are approximately 4.7m bales against around 2m bales of producer commitments, which does not indicate the market will realise market spikes when the July contract approaches its delivery period,” Mr Rose said.
However, food-related ags fared better in early deals, even if just really by pretty much standing still, with Chicago corn futures for May, for instance, easing all of 0.1% to $3.81 ¼ a bushel.
While, as Benson Quinn Commodities noted, Taiwan “is still buying Argentine corn and not US”, reportedly purchasing 65,000 tonnes, there remains as Terry Reilly at Futures International “widespread talk” that China is purchasing US distillers’ grains, or DDGs.
(DDGs are a byproduct of grain ethanol manufacture used as a high-protein feed ingredient.)
After all, US ag exports are being offered appeal by a tumbling dollar, which shed a further 0.6% against a basket of currencies to an eight-month low in early deals, amid ideas of a further US interest rate cut to come.
The dollar is now down 3.6% from a February 20 high.
Also on the supportive side was a welcome for an Environmental Protection Agency announcement of a marked reduction in the number of refinery waivers against biofuel blending commitments,
And there is growing focus on the prospect of the start of US spring sowings too, at a time when some southern soils are excessively wet.
“Ag markets are aware of constructive tailwinds including concern over a saturated Mississippi River basin, ongoing firm domestic US corn basis, and repeated Washington assurances that China will honour phase one trade deal commitments,” said Richard Feltes at RJ O’Brien.
‘Stocks remain low’
Similarly, soybeans eased too, but by just 0.1% to $9.05 ½ a bushel for May.
While latest US export sales data was soft, there is talk of an Argentine producers’ strike ahead, which will add to the challenges from that origin injected by the extra export levy (which farmers are protesting about).
Furthermore, soymeal futures gained 0.4% to $309.50 a short ton, returning to the offensives after a negative performance last time despite some decent US export sales data for last week, of 316,660 tonnes.
Actual exports, of 338,257 tonnes, reached a 10-month high.
And this when, as Benson Quinn Commodities noted, US soymeal “stocks remain low, currently pegged at 471,400 tonnes, or a third lower than normal for this time of year”.
By contrast, US soyoil stocks at 1.34m tonnes are “nearly 30% above the seasonal average since 2015”.
Still, while the vegetable oil dropped 1.1% to 29.08 cents a pound for May, that was more in the slipstream of palm oil, which in Kuala Lumpur plunged by 3.0% to 2,448 ringgit a tonne.
Palm was little helped by 1.2% fall overnight to 5,118 yuan a tonne in Dalian futures for May, which countered somewhat talk of Chinese buyers being in the market. (Although they could already have bought, of course.)
Furthermore, there remained a temptation to book profits in palm oil ahead of the weekend, with the May lot remaining up 5.5% for the week.
‘Rains will be needed’
Back in Chicago, wheat for May proved again the strongest of the big three contracts, adding 0.3% to $5.20 ¼ a bushel, finding particular support, as an especially widely-origined (Agrimoney is sure this is a word) commodity, from the falling dollar.
Russia’s rouble strengthened 0.2% against the dollar too.
While there remains the potential of a huge Russian harvest ahead, after a mild winter, some concerns of depleted soil moisture levels are registering too.
“Ukraine and Russia need rain ahead of spring plantings,” Mr Reilly said.
Agritel said that “in the Black Sea area, crops are still showing a good vegetative development, however, rains will be needed in coming weeks due to weak moisture reserves in the soils”.