A somewhat seasoned market theme re-emerged on Friday, that of hopes for a China-US trade resolution, to provide selected price support.
White House economic adviser Larry Kudlow said overnight that the Trump administration is still planning for a round of face-to-face negotiations between US and Chinese officials next month, after some progress in preliminary talks this week.
“We are still planning for the Chinese team to come over here in September,” he said.
The news sent Chinese stocks higher, with the Shanghai Composite index adding 0.5% to take gains this week to 2.6% - its best weekly performance in two months.
‘Less than supportive’
On ag markets, it was crops particularly exposed to Chinese demand from the US which fared best – also ags in which funds have large short bets, leaving values liable to upward price pressure on end-of-week position closing.
In New York, cotton futures for December added 0.5% to 59.24 cents a pound, reversing some of the losses last session on weak US export sales data.
“We remain optimistic regarding the prospect of significant-to-notable demand for US cotton below the 60.00 cents a pound level, despite weak sales data for the week ending August 15,” said Louis Rose at Rose Commodity Group.
That said, he was unimpressed by some other US data out late on Thursday, on on-call cotton commitments, ie deals for pricing later against futures, which for mills showed only a small rise to about 9.15m bales.
“Producer commitments against all contracts were significantly higher at approximately 6.5m bales,” Mr Rose said, adding that “the overall structure of these data remains less than supportive”.
‘Highly varied crop’
In Chicago, it was soybeans which started brighter than grains, adding 0.3% to $8.71 ¼ a bushel for November delivery as of 09:35 UK time (03:35 Chicago time), finding a little more support too from results from the Pro Farmer crop tour.
In fact, the tour has not been quite as negative for crop prospects as many investors had expected.
“Latest tweets from the tour still showing a highly varied and mostly immature crop, with potential,” said Benson Quinn Commodities.
But ideas of soybeans remain more downbeat than those for corn, after scouts found well-below-average pod counts.
Still, it must be noted that worries over demand are elevated for soybeans too, with ADM Investor Services noting that “as of August 15, cumulative soybean sales stand at 10.9% of the US Department of Agriculture forecast for 2019-20” overall.
That compares with a five-year average figure of 30.6%.
“Sales of 787,000 tonnes are needed each week to reach the USDA forecast,” the broker added.
Yet top importer China remains fixated on buying from South America, from where it is buying so much that even if the US and China do reach a trade accord, it may take some time to feed through into soy trading.
Terry Reilly at Futures International noted that on Wednesday night “China bought at least nine cargos of South American soybeans for mostly October and some November shipment, even through the landed import price of soybeans continues to rise to multi-month highs.
“Brazil, Argentina and Uruguay were origin.”
‘Pales in comparison’
AgriVisor’s Karl Setzer noted that while Thursday’s US export sales report “did show some business was done with China recently, it pales in comparison to the purchases China has made from Brazil.
“In the past week China has booked a reported 50 vessels of Brazilian soybeans,” including ideas that it on Wednesday “locked in 12 cargoes of Brazilian soybeans.
“China is now thought to be covered on soybeans through mid-October, which is limiting their soybean demand at this time.”
As Minneapolis-based Benson Quinn Commodities put it, “China appeared as a destination for 66,000 tonnes” of US soybeans, in the export sales report for last week.
“We sold one cargo, while Brazil does 30+.”
Chicago corn futures for December, meanwhile, eased by 0.1% to $3.70 ¼ a bushel.
Worries remain about US corn demand too, with ADM Investor Services noting that “as of August 15, cumulative corn sales stand at 9.0% of the USDA forecast for 2019-20, versus a five-year average of 17.1%.
“Sales of 866,000 tonnes are needed each week to reach the USDA forecast.”
That is a total not achieved since May.
‘Extended dry period’
Nor could wheat manage much of a better outcome this time, standing flat at $4.71 ¾ a bushel for December, although December Kansas City hard red winter wheat did fare better, in gaining 0.4% to $4.05 ¾ a bushel, helped by some improved export performances of late.
One potentially bullish factor is the Argentine winter wheat crop, which Tobin Gorey at Commonwealth Bank of Australia said had “come onto the market’s risk radar because of an extended dry period.
“La Pampa in particular has minimal soil moisture. And weather forecasters are not projecting that to change over the next week or so.”
That said, he added that “the situation is quite some way from prompting analysts to cut crop estimates”, which have started off at record highs.
Palm oil debate
Returning to the China import theme, palm oil futures edged 1 ringgit higher to 2,257 ringgit a tonne in Kuala Lumpur, despite weakness overnight in Chicago futures in rival vegetable oil soyoil.
Indeed, Chicago soyoil shed a further 0.1% to 28.87 cents a pound for December in early deals on Friday.
Palm oil is being supported by South East Asian production worries spurred by recent dryness blamed on El Nino, albeit that the weather pattern is fading, and seen by some meteorologists as extinct.
Not that all observers are quite so upbeat on prospects for palm oil values, and downbeat on output prospects.
Anglo-Eastern Plantations said earlier this week that "prices are expected to remain subdued in the coming months due to oversupply, competitive pricing of other vegetable oils and projection of higher production in the second half of 2019".
The group also flagged analysis that "the spread between CPO [crude palm oil] futures and spot prices has narrowed over the past months signalling the market’s negative sentiments on CPO prices going forward".