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Morning markets: Palm oil prices recover, on ideas of stocks draw ahead

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Data ahoy.

 

After a couple of weeks of relatively clear water, as far as big grain reports is concerned, markets are preparing for the next significant US Department of Agriculture briefings, on Monday, on quarterly crop stocks, and on production of so-called small grains such as wheat and oats.

 

The stocks data particularly have a reputation for moving markets, offering, through their indication of inventory change over the previous three months, a rare insight into total demand for grains, including the likes of feed use which are tricky to quantify otherwise.

 

But the small grains briefing will be closely watched too in the current market and North American climate for its indication of production of the wetness-pressed US spring wheat crop.

 

(The consensus forecast is for a figure of 585m bushels for US output of non-durum spring wheat, 12m bushels below the USDA’s current estimate.)

 

‘Sooner than you think’

The prospect of important reports on the horizon can prompt a bit of reversal and to-ing and fro-ing in grain markets, as investors position ahead, especially with month-end and quarter-end to consider too, times when funds are often seen as tidying up holdings.

 

That said, ahead of Monday’s briefings the market has weekly statistics on US export sales to consider which are taking on increased importance, in potentially offering further insight into how much trade the US is getting from China, now that relations between the countries appear to be improving.

 

US President Donald Trump said on Wednesday that a US trade deal with China “could happen sooner than you think”.

 

‘Rather modest’

Certainly, cotton, an ag particularly sensitive to US-China trade tensions, given that it is usually a big export from the former to the latter, gained - although by a minimal 0.1% to 60.48 cent a pound in New York for December delivery as of 09:45 UK time (03:45 Chicago time).

 

Not that an uptick, at last, in the weekly US export sales statistics for cotton is necessarily expected in the briefing later on Thursday.

 

“With respect to export data, sooner or later we will be pleasantly surprised, but data do not suggest that tomorrow must be that day,” said Louis Rose at Rose Commodity Group.

 

He said expected the sales data “to be rather modest”.

 

Data later

US soybean export sales data later for corn and soybeans are expected to be down week on week – although that does reflect comparison with some decent statistics last time.

 

For corn, export sales are expected to come in at 600,000-1.10m tonnes, compared with 1.46m tonnes the previous week.

 

For soybeans, the statistics later are forecast at 600,000-1.30m tonnes, compared with 1.73m tonnes last time.

 

Ahead of the data, futures in both commodities were little changed, with corn for December down 0.1% at $3.73 ¾ a bushel, and November soybeans 0.1% lower at $8.88 ¼ a bushel.

 

Palm price gains ahead?

In the oilseeds complex, there was greater movement in palm oil, which added 0.7% to 2,162 ringgit a tonne in Kuala Lumpur, after earlier briefing falling below its 50-day moving average on a continuous chart.

 

Indeed, Brent crude was hardly helpful to an ag used largely in making biodiesel, falling by 0.5% to $62.09 a barrel.

 

But more encouraging for palm bulls were comments by James Fry, chairman of consultancy LMC International, who forecast dwindling inventories driving European prices of the vegetable oil to $620 per tonne, or $570 on a free-on-board basis, by the April-to-June quarter of 2020.

 

While palm inventories were expected to "follow their usual seasonal pattern and rise till November”, reflecting the seasonal high in South East Asian output just ahead of that, “after that, palm oil output will be weak”, Mr Fry said.

 

That reflects not just the usual seasonal downturn, “but also because of the cumulative impact of cutbacks in fertiliser use in the past two years and of recent droughts on yields”.

 

Hard vs soft

Meanwhile, among grains it was wheat which showed more conviction in its movement, and forward for a change, after a week of unbroken falls – for Chicago soft red winter wheat, at least.

 

This time, the Chicago December contract added 0.7% to $4.80 ½ a bushel, after earlier bouncing from its 40-day moving average, at $4.76 ¼ a bushel.

 

Kansas City hard red winter wheat for December gained 0.7% to $4.06 ¾ a bushel, failing yet to continue nibbling away at its unusual discount to its lower protein peer – particularly unusual in the size of the gap too.

 

‘Not very competitive’

Sure, there remain worries over US prices compared with those in rival origins.

 

As Agritel noted, and as Wednesday’s tender by Egypt’s Gasc implied, US wheat is “not very competitive” to destinations beyond its typical comfort zone, with some French wheat priced below $194 per tonne, excluding freight.

 

US export sales data later for wheat “will therefore be followed with great attention today”, the analysis group added.

 

The figure is expected at 200,000-500,000 tonnes, compared with 286,589 tonnes last time.

 

‘Will make a mess’

Still, there do remain plenty of challenges to world wheat production, including dry weather in Argentine and Australia, where 2019 crops are filling ahead of harvest, as well as in the likes of Germany and Ukraine, where sowings are being undertaken of winter wheat to be harvested next year.

 

The pressing issue, however, is the wetness in the northern Plains into Canada’s Prairies, holding up harvest of the harvest of 2019 spring wheat, and threatening the quality for which the crop is renowned.

 

Benson Quinn Commodities said that “weather for the weekend may see snow in Montana and North Dakota, adverse conditions with snows of 2-6 inches possible in south western and south central Saskatchewan and lighter amounts into Manitoba”.

 

The falls “will make a mess of unharvested small grains in those areas.

 

“Northern US Plains, Montana could see 4-10 inches of snow, with a foot possible in localised areas.

 

Then “rains are expected in these areas starting Thursday,” preceding a cold front which has raised the frost alert in the US, “so little fieldwork is anticipated if verified”.

 

Minneapolis spring wheat rose, by 0.5% to $5.57 ¼ a bushel for December, although this time not far outperforming its winter wheat peers – having already recovered quite a bit of premium over the past week.

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