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Morning markets: Soybean futures look to turn over new leaf in new month

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New month, new money?

 

In early deals, at least, grain futures staged a firm, if not spectacular, start to December, with even soybeans joining in this time.

 

No news may have been good news for the oilseed, in terms of there being no further apparent further repercussions for China-US trade talks of President Donald Trump signing a bill supporting pro-democracy protestors in Hong Kong.

 

“US China trade negotiations are ongoing but there is no news emerging,” said Tobin Gorey at Commonwealth Bank of Australia.

 

“Radio silence might continue for another week at least.

 

“Our best guess is that the legislation will not derail the two nations’ trade negotiations – but it will likely delay any visible progress.”

 

‘Function of time’

Besides, there are some who believe that for ags in general, negative news has been priced in.

 

At Global Commodity Analytics, Mike Zuzolo proposed “that the downside in the agriculture sector (excluding potentially cattle) is becoming more limited”.

 

This as “funds remain net short, as global supplies continue to be threatened, and as the negative relationship in the macro-relationship becomes stretched”, with Mr Zuzolo viewing that the ag market has done enough to factor in waning inflation expectations.

 

“This situation… has now gotten to a point where the relationship, or correlation between the 10-year yield and the Bloomberg Grain Index has hit a negative 96% on a 10-week basis, he said adding that these factors “are essentially opposite one another on a near one-to-one basis”.

 

This situation looks like being unwound – “it is now a function of time in my view”.

 

‘Further improve moisture’

Not that all the news for the oilseeds sector was positive for prices.

 

Maxar noted that in Brazil this week, “widespread rains across central, southern, and northwest areas through Friday should further improve moisture for corn and soybeans”.

 

CHS Hedging noted that “the currencies of both Brazil and Argentina continue to slip lower versus the US dollar, making it harder for US beans to compete.

 

“Reportedly, the flat price Brazilian farmers are receiving is the highest in five years.”

 

Terry Reilly at Futures International flagged some negative data for the soyoil market in that “US production of biodiesel was 142m gallons in September, 14m gallons lower than production in August.

 

“October-September soyoil for biodiesel ended up at 7.865bn pounds, well below our working estimate of 8.002bn and US Department of Agriculture’s 8.000bn November projection”.

 

‘Disappointing export data’

Still, Chicago soyoil futures for January managed a 0.2% gain to 30.63 cents a pound as of 09:45 Uk time (03:45 Chicago time), and this despite some small setback in rival palm oil, which eased by 0.2% to 2,740 ringgit a tonne in Kuala Lumpur (although recovering from an intraday low of 2,685 ringgit a tonne touched earlier).

 

“Palm prices are dropping to start the week following disappointing export data,” said Agritel.

 

Malaysian palm exports fell by 7.4% month on month in November, according to AmSpec Agri, although rival cargo surveyor ITS put the decline at a more modest 2.9%.

 

Back in Chicago, soybeans themselves for January stood up 0.5% at $8.80 ¾ a bushel, looking for their first winning session in eight.

 

‘Demand is shifting’

Chicago March corn futures, meanwhile, were up 0.3% at $3.82 ½ a bushel, looking for a second successive positive session for the first time since October.

 

Positive comment remained over weekly data on Friday showing US corn export sales of 807,000 tonnes, which Futures International’s Terry Reilly said indicated that “demand is in fact shifting from South America to the United States”.

 

ADM Investor Services said that “futures may be oversold as managed funds added to weakness linked to slow US export demand”.

In fact, basis has been strong, supported by a slow pace of harvest, and “some feel that seasonally, futures could rally as cash sales slow” even further.

 

‘Still have catching up to do’

Benson Quinn Commodities said that for corn “it feels like the trade is paying more attention to a large percentage of the crop being light, the fact that it has been tough to get the crop bought, both old and new crop, the amount of crop left in the field and the funds being short.

 

“The European Union has struggled to get its corn crop off, also.

 

While hedge fund net short in corn has “worked well for a month, it hasn’t worked the best the last week or so”.

 

Nonetheless, CBA’s Tobin Gorey urged against getting too carried away, saying that while it looks like “Chicago futures prices around $3.80 a bushel translate into competitive export pricing”, a rally may struggle to get too far for now.

 

“US corn exports still have some catching up to do – no point in pricing out of export competitiveness.”

 

‘Realising its worries’

It was wheat futures, the star of the last session, which struggled a bit this time, although the Chicago March contract stood only 0.1% lower at $5.41 ½ a bushel, with worries remaining about crops in a range of countries.

 

“The market is realising its worries about Argentina’s wheat crops,” Mr Gorey said.

 

“Reports from Argentina suggest yields in some regions ae down by more than a third.”

 

Agritel noted that “concerns remain high about winter wheat plantings mainly in France and Great Britain due to inappropriate climatic conditions”.

 

Drier weather is expected this week, but even if farmers do get some winter crop in, it will come with a yield penalty, in the UK certainly.

 

‘At least a 110-year low’

Mr Reilly noted that “parts of Canada still have unharvested spring wheat in the fields”, while in the US, “about 1-3% of the ‘intended’ planted area for 2020 winter wheat may not get planted.

 

“That does not sound like much but in early fall, we were looking for a slight increase in the winter area from last year.

 

“Now we are looking at a slight decrease, which would put the all winter area at least a 110-year low.”

 

And Benson Quinn Commodities reminded of the lack of deliveries against winter wheat (and corn) ahead of first notice day for the December lots.

 

“The lack of deliveries in corn, Chicago wheat and Kansas City wheat indicates that ownership isn’t interested in giving the ownership up.”

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