Vegetable oil futures set off on a tear.
Palm oil futures, having struggled, and eventually failed, to hang on to positive territory in the last session in Kuala Lumpur, had no trouble this time.
The November contract soared 2.7% to 2,880 ringgit a tonne as of 10:15 UK time (04:15 Chicago time), easily absorbing Monday’s losses to return close to seven-month highs.
The gains followed a bring start by rival vegetable oil soyoil in Chicago, which was closed on Monday for a US holiday.
Soyoil emerged refreshed from its long weekend, with the December contract opening markedly higher and continuing to gain, to standing up 2.2% at 33.60 cents a pound.
Still, if the effects were obvious, the cause was not. Although, as ever, China was mentioned, as it always seems to be these days when prices move without any other obvious alternative explanation.
One theory doing the rounds was that the gains reflected weaker Chinese soybean import data for August, and more downbeat expectations on further purchases as revealed in a report from the US Department of Agriculture’s Beijing attache.
That reflected a slightly lower forecast for the Chinese crush, meaning less soyoil production, and so enhanced potential for imports. (Not that the attache saw it that way.)
Whatever, in China, Dalian soyoil futures for January closed up 1.6% at 6,872 yuan a tonne, a contract closing high.
Dalian palm oil for January finished up 1.1% at 5,920 yuan a tonne, the lot’s second highest finish.
Soymeal, the stronger performer of the two soybean processing products, managed only a 0.3% gain to 2,996 yuan a tonne for January this time.
Back in Chicago, soymeal futures for December were not so fortunate, easing by $0.10 per short ton to $317.10 per short ton, reversing their outperformance over soyoil last time.
Then, “funds were liquidating long soyoil and short soymeal spreads,” said Steve Freed at ADM Investor Services.
Soybean futures, meanwhile, added 0.8% to $9.76 a bushel in Chicago for November delivery, supported by soymeal, but also by ideas that the US Department of Agriculture will, in its Wasde briefing on Friday, slash expectations for US stocks of the oilseed at the close of 2020-21.
The estimate is expected to be cut to 465m bushels from the current estimate of 600m bushels, and a figure which would represent a 150m-bushel drawdown on US inventories over the season too.
Comparing stocks figures with historic price levels signals that “the soybean price may be low heading into the USDA report,” said Mike Zuzolo at Global Commodity Analytics.
The forecast reflects in part a reduction in expectations for the US harvest, thanks to a setback from recent dryness.
Terry Reilly at Futures International said that “we look for corn and soybean conditions for the combined good and excellent ratings to decline by one point each,” when the USDA later on Tuesday unveil its weekly Crop Progress report.
Furthermore, confidence is growing in US soybean exports, after 2020-21 started this month with a record roster of sales – largely to China, of course.
“We heard China’s Cofco on Thursday bought at least 10 cargos of US soybeans for December and January shipment out of the Gulf and Pacific North West,” Mr Reilly said.
That wasn’t reported on Friday through the USDA’s daily alerts mechanism. Will it be later today?
Corn futures performed even better, adding 1.2% to $3.62 ¼ a bushel for December, to cross above their 200-day moving average for only the second time in 10 months.
If they managed a close above that level, at $3.61 ¾ a bushel or above, that would be the first since August last year.
That landmark helped keep funds onside despite Commodity Futures Trading Commission data which showed they had already undertaken more buying of corn than many investors had expected, in fact returning to a net long position.
“The trade really missed the estimate for the traditional fund corn position,” Mr Reilly said.
That could have been a negative, in terms of meaning that funds had already exercised more of their buying ammunition than the market had factored in.
As for the Wasde, that is expected to cut the forecast for US stocks at the close of 2020-21 too, by 305m bushels to 2.451bn bushels, although that would still represent an increase year on year.
Besides weakened yield expectations, US corn export sales have started 2020-21 strongly too.
“Chinese purchases are supporting soybean and corn prices,” said Agritel.
Steve Freed at ADM Investor Services noted “talk that China may import 15m-20m tonnes of corn in 2020-21”, compared with a USDA forecast of 7m tonnes. “The US share could be 12m tonnes.”
However, wheat failed to follow Chicago’s other big-two contract higher, shedding 0.7% to $5.46 ¼ a bushel for December delivery, and dropping back below its 10-day moving average.
The Wasde is not expected to make material change to the USDA forecast for US wheat stocks at the close of 2020-21, with a forecast trim of just 1m bushels to 924m bushels.
Meanwhile, world supply expectations got a boost with Abares upgrade to its Australian crop forecast, underlining expectations of a strong export performance by the country ahead.
In Sydney, east coast wheat futures sank by 1.0% earlier to Aus$290.00 a tonne, missing a chance to test their 100-day moving average just above Aus$294.
Fund data were seen as potentially negative here too, in terms of managed money having already stocked up heavily in the latest week, including record buying sprees in Kansas City hard red winter wheat and Minneapolis spring wheat.
December hard red winter wheat futures stood down 0.6% at $4.69 ½ a bushel, although spring wheat was more resolute, easing only 0.1% to $5.55 ¼ a bushel, after Friday’s lower-than-expected Canadian wheat stocks figure.