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Morning markets: 'Ugly month' for ags attempts some late salvation

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January, termed an “ugly month” by Mike Mawdsley at First Choice Commodities, actually took aim at a slightly a more decorative finish.

 

Sure, coronavirus remains firmly in focus, with the death toll in China now at 213, and cases at 9,692, with a further 130 or so elsewhere.

 

“For the moment everyone watching the next tweet to see how much it is spreading and monitoring the death toll,” Mr Mawdsley said.

 

And the concerns over what this might mean to Chinese ag demand remain rife.

 

‘Agreement may be void’

“China’s lunar new year holiday is its biggest consumer spending season of the year and most of China’s population stayed home this year in an effort to contain the spread of this new virus,” said Benson Quinn Commodities.

 

“What the world need to get out from under big supplies is big demand. And the coronavirus outbreak in China does not make a demand market.”

 

At Agrivisor, Karl Setzer said that “the most concern is what this is doing to the Chinese economy as losses are expected to top the $54bn from the Sars virus”.

 

For ags there is particular disappointment, of course, with the virus following so closely on the heels of the China-US phase one trade deal – which some market rumour suggests could be compromised by some kind of market downturn clause.

 

“There are now thoughts that according to contract verbiage, the phase one agreement may be void because of the virus outbreak,” Mr Setzer said.

 

Amazon aid

However, ends of weeks and in particular months often bring a change of a direction, offering a cue for investors to take profits (in this case on short bets, meaning upward pressure on prices) and press the reset button.

 

Amazon, as in the online retailer, helped improve the investment mood by unveiling much better-than-expected results, sending its shares up 10% in after-hours trading.

 

The beat was helped by a strong Christmas-new year holiday period, helped by the expansion of one-day shipping across the US.

 

(It is an unfortunate contrast to China’s new year, marked by quarantine effects which put some 57m people in 15 cities in lockdown.)

 

Crude gains

Certainly, there was a brighter tone in global markets, where the renminbi held at 6.98 per $1, avoiding another slip below the psychologically-important 7.00 mark, and Tokyo shares posted a 1.0% gain. (OK Hong Kong ones did fall by 0.5%.)

 

Brent crude added 0.6% to $58.63 a barrel as of 09:45 UK time (03:45 Chicago time) and, ADM Investor Services noted, “corn futures tend to have a strong correlation with direction of crude oil prices”.

 

Chicago corn for March added 0.3% to $3.80 ¾ a bushel, also continuing to get plaudits from the improvement in US export sales data, as confirmed with Thursday’s latest weekly report, and with ADM boss Juan Luciano foreseeing further strong trade for the next two or three months.

 

Fellow grain wheat added 0.4% to $5.62 ¾ a bushel in Chicago for March delivery, after some decent US export sales data here too, and with French victory in the latest tender by Egypt’s Gasc suggesting Black Sea exporters not fighting too aggressively.

 

(Indeed, it was the first Gasc tender since October not to feature a purchase of Russian origin.)

 

The purchase brought to 720,000 tonnes the amount of French wheat that Gasc has bought at tender in 2019-20, “and it is necessary to go back to the 2014-15 campaign to see such a volume,” said Agritel.

 

Palm down

As for soybeans – which, given the high hopes for Chinese purchases from the US after the country’s trade deal, have suffered particularly badly from coronavirus fears (and a lack of pick-up Chinese orders from the US – the March contract added 0.2% to $8.78.

 

That represented a bounce from the lot’s worst close in eight months and, if maintained, would represent the first positive session in nine.

 

Still, there remains some caution over bargain hunting, even at these levels.

 

“Soybeans are extremely oversold on the daily charts and are heading into oversold territory on the weeklies,” said Benson Quinn Commodities.

 

Howqver, “I think we need to see the updated COT report before we can start forming a bottom in the beans,” with this positioning of traders briefing to be released after the close of markets later.

 

Export decline accelerates

Soy buoyancy was constrained by a timid performance by soyoil, which for March stood unchanged at 30.63 cents a pound, weighed in turn by rival palm oil, which in Kuala Lumpur shed 1.9% to 2,603 ringgit a tonne, having lost nearly all the ground regained after Monday’s 10.0% plunge.

 

The decline in palm oil left it just above its 100-day moving average on a continuous chart, at 2,600 ringgit a tonne.

 

Data from cargo surveyors showed some deterioration in Malaysian palm oil exports this month, with SGS showing them at a 7.9% decline from December (which did have an extra day, but also holiday disruption), compared with a 4.8% pace of decline as of January 25.

 

ITS showed full-month exports down by 7.4%, compared with a 1.3% rate of decline as of January 25, with AmSpec putting the figures at (negative) 8.7% and 5.2% respectively.

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