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Morning markets: When will the 'most boring agri market' liven up?

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When will corn escape its price snare?

 

The March contract has since August been trapped to the upside by its 200-day moving average, currently at about $4.04 a bushel, while finding support around $3.70 a bushel.

 

And even within that corridor it is encountering other obstacles which has seen its trading range for 2020 become narrower still.

 

‘Most boring agri market’

As Tobin Gorey at Commonwealth bank of Australia put it, “corn, for now, holds a lead in the race to be the most boring agri commodity market”.

 

“Corn continues to trade in the box,” said Benson Quinn Commodities.

 

The contract “remains rangebound running into resistance as the 20- and 50-day moving average lines form resistance to the upside near $3.85 a bushel”.

 

“Support is found at $3.76 level as corn continues to trade in the box. Need some news to push corn above the 100-day at $3.88.”

 

‘Pivotal level’

Mike Mawdsley at First Choice Commodities, said that “the market doesn’t know which way to go”.

 

Still, one clue as to which way it might go from here is how it deals with the $3.80 a bushel mark, which he termed “a pivotal level”.

 

A move below that for any marked length of time would mean that “testing $3.71 a bushel is likely”.

 

And the lot in fact fell 0.3% to $3.79 ¾ a bushel as of 10:30 UK time (04:30 Chicago time).

 

‘Should have been supportive’

As to whether it can climb back above this watershed in this session, demand signals, and in particular exports, look like having a large say.

 

The market was able in the last session to slough off decent US ethanol production data for last week.

 

Indeed, ethanol production “margins appear close to positive”, said Benson Quinn Commodities, adding that the “report should have been supportive corn values”.

 

However, as CHS Hedging put it, in the last session price “gains were limited from uncertainty about future export demand”.

 

Data later

ADM Investor Services said that the corn market is “trying to balance hope that China could buy some US corn and slow US farmer selling versus talk of higher US and world 2020 corn supply, and to-date slow US export trade”.

 

Whether US Department of Agriculture data later can change that narrative a bit…

 

Officials are expected to show US corn exports last week at 600,000-1.30m tonnes, compared with 1.23m tonnes the previous week.

 

That said, the data are being watched not only for the headline volume, but for where that demand is coming from – with China, of course, closely watched among all ags for signs of orders of US supplies kicking in following the phase one trade deal between the two countries.

 

‘Corn import possibilities’

Karl Setzer at AgriVisor flagged the potential for China buying corn, despite also announcing the release of stocks from state inventories to help tackle some of the supply shortfalls caused by the lockdown ordered in an effort to stem the spread of coronavirus.

 

“Even with concerns over demand and usage from the coronavirus, China is looking at corn import possibilities,” he said.

 

“China has corn in reserve in northern parts of the country, but this is needed in southern regions. Quarantines in China are preventing this movement from happening.

 

“As a result, China may import corn into southern regions to satisfy demand until the virus can be controlled.”

 

‘China continues to buy soybeans’

China has continued to look at soybean import possibilities too – although buying from Brazil rather than the US.

 

“China continues to buy soybeans despite the coronavirus epidemic,” said Terry Reilly at Futures International noting talk that “they bought at least 10 cargos of South American soybeans earlier this week.

 

“One source mentioned up to at least 1m tonnes was bought,” including from state-run buyers.

 

The purchase mean that “is basically covered for February and nearly done for March shipment,” Mr Reilly estimated, although adding that “they have about 4m-8m tonnes more to buy for combined April and May shipment”.

 

Whether they have been buying US supplies as well under the radar, the USDA weekly export sales data later may show, expecting to come in at 400,000-800,000 tonnes, compared with 469,710 tonnes last time.

 

‘Production crimped, demand robust’

In early deals, Chicago March soybean futures stood up 0.5% at $8.84 ¼ a bushel, faring better than corn.

 

But then, they lost more in the immediate coronavirus sell-off, and now stand, like corn, down 2% since the start of last week.

 

Support on Thursday came from a further recovery in soyoil futures, which for March added 1.3% to 31.71 cents a pound, as rival palm oil extended its recovery, gaining 1.7% to 2,852 ringgit a tonne in Kuala Lumpur.

 

“Malaysian palm stocks are seen declining to three-year lows as production remains crimped while demand remains robust,” said Benson Quinn Commodities, referring to data expected on Monday from the Malaysian Palm Oil Board.

 

Change in narrative

Back in Chicago, wheat futures for March shed 0.7% to $5.58 a bushel, in fact nursing bigger coronavirus losses than corn and soybeans, of 2.7% since the start of last week.

 

“Before the ‘flu epidemic rudely interrupted, the focus was on thinking should about how high prices be given the tighter turn in the wheat supply screw,” Mr Gorey said.

 

Now, well, ADM Investor Services said that “there continues to be talk that under the phase one US-China trade deal, China may buy US wheat”.

 

However, most investors “feel if they do, it may be after US 2020 harvest”.

 

US export sales data later for wheat are expected at 200,000-700,000 tonnes, compared with 646,295 tonnes the previous week.

 

Cold weather watch

Benson Quinn Commodities flagged, on the supply side, “small concerns over winter wheat conditions as snow falls in north Texas”, with “recent dry conditions in other parts of hard red winter wheat country also” potentially a help to prices.

 

“Colder temperatures are forecast for the next week may also be supportive.”

 

However, worries over winterkill in Russia and Ukraine are receding, according to Agritel, even though “the coldest temperatures since early winter have been seen this morning, with -7° Celsius in Kiev, and in the central regions of Russia.

 

While in “the Kuban, temperatures remain warm, with +15°C in Krasnodar”, Sunday is expected to see -9 degrees Celsius.

 

Still, “this cold wave from Siberia should quickly dissipate and should not cause any negative consequences for crops”.

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