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Morning markets: Dollar renews decline, helping grains. But...

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The dollar may recover, as US President Donald Trump has forecast.


“The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar,” he said overnight.


And direction later on Friday may indeed depend largely on his forthcoming address to the World Economic Focus in Davos.


But in early deals, the greenback resumed its downward move, standing at 88.8 against a basket of currencies, a drop of 0.7% on the day, although staying just above the three-year low of 88.429 reached in the last session.


‘Drought gets worse’


And with that, US-traded agricultural commodity prices got off to a firm start, with a weaker greenback making dollar-denominated ags that much more affordable.


Wheat led Chicago’s big three, adding 0.6% to $4.37 ¼ a bushel in Chicago for March delivery as of 08:30 UK time (02:30 Chicago time), helped too by worries over dryness in the US Plains, which bodes ill for the winter wheat crop – although it has to stressed that seedlings are dormant and require little moisture for now.


CHS Hedging noted that “in general, basis for hard winter wheat in areas of the southern Plains were steady to firm on Thursday, as the drought in Oklahoma and Texas areas gets worse”.


Such as underlined by official Drought Monitor data showing 99.2% of Oklahoma in drought, the highest reading in nearly five years.


Data later


And all this when speculators have a large net short position in wheat, as they do in corn and soybeans too, which looks less and less comfortable as the dollar retreats, and US export prospects pick up.


“I like the fact that the attitude towards commodities has the trade thinking that markets have as good a chance at going up as they do going down,” Benson Quinn Commodities said.


More on US exports will be revealed later, with the US Department of Agriculture export sales data for last week, expected for wheat to come in at 200,000-500,000 tonnes.


That would represent an improvement on the 153,115 tonnes the week before, although still hardly represent a bumper rate.


Still, it should be remembered that the data are for the week to January 18, when the dollar was notably stronger than now, not straying below 90 points against a basket of currencies.


Algerian purchase


On the trade theme, by the way, Algeria was overnight revealed to have purchased at least 500,000 tonnes of milling wheat, at prices reported at $219-220.50 a tonne.


The origin of the wheat was reported as optional, although most probably French and Argentine.


Agritel said that the result “shows indeed that the current price levels on the international scene remain attractive”.


It also confirmed “competition between Argentinean and French origins… towards this destination where the evolution of maritime freight will be [interesting] to monitor as the contract execution period approaches.”


After all, shipping from Argentina to North Africa is a lot further than from France, although freight rates have dropped off again, after their strong close to 2018.


(The jump in the Baltic Dry index to a near-four-year high on December 12 was indeed seen by some as a harbinger of higher commodity prices to come, in which case its 30% fall since may not be so comforting for bulls.)


Argentine debate


Chicago corn futures for March stood up 0.2% at $3.56 a bushel, surfing the falling dollar tide.


“The dollar will be the main factor in corn price discovery in the night session and to end the week Friday,” Benson Quinn Commodities said.


Still, there are US export sales to digest too, expected at 900,000-1.25m tonnes, which would be a strong figure, if a little behind the 1.89m tonnes last time.


Argentine weather remains in focus too, although weekly comments from the Buenos Aires grains exchange were not nearly as price positive as those from the Argentine farm ministry a few hours earlier.


‘Basis steady to weaker’


And soybean futures for March added 0.2% to $9.94 a bushel, looking to resume their winning streak after a flat close to the last session.


(The contract has now gone nine sessions without a loss.)


Upward progress is fighting against sales from farmers, in the US at least, with CHS Hedging noting that “soybean basis bids on Thursday were steady to weaker as farmers are taking advantage of opportunities to sell”.


Still, Brazilian growers are reported to be notably behind with forward selling, deterring by a recovery in the real, which cuts the value in local terms of assets priced internationally in dollars.


‘Export sales will prove to have slowed’


In New York, cotton futures missed out on gains, easing by 0.02 cents to 81.86 cents a pound for March delivery.


This after closing the last session below their 10-day moving average for the first time in two weeks, underperforming other ags.


But the cotton is dancing somewhat to a different beat, with funds having ramped up a record net long position amid a squeeze on mills, which have a stack of contracts yet to price against futures, in so-called “on call” deals.


Meanwhile, export data later is seen softening somewhat from the recent strong pace.


“The balance of a rigorous analysis of data suggests that total export sales for the week ending January 18 will prove to have slowed versus the pace of the last two weeks,” said Louis Rose at Rose Commodity Group.


“The March contract did not trade below the 80.00 cents-a-pound level over the sales period to be reported and, even accounting for weakening US currency, real prices look to be around 1% higher versus the period ending January 11.”

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