(Agrimoney) – Modest buying was in the air on Friday, albeit mainly for shares, but with some early firmness in agricultural commodity markets too.
The upbeat mood stemmed for stock investors stemmed largely from a strong performance overnight on Wall Street, where the S&P 500 returned to some 5% from May’s record high, and took above 8% its recovery from its August low.
(The old adage for share investors of “go away in May and come back on St Leger Day”, a month or so ago, seems to have worked its magic again.)
The rise on Wall Street, which futures indicate continuing on Friday, has been attributed to a positive view of the Federal Reserve’s reluctance to raise interest rates.
And Tokyo shares closed up 1.1% and Sydney stocks up 0.7%, while Shanghai shares gained 1.6% – ahead of a test on Monday from Chinese GDP data for the July-to-September quarter.
‘Welcome distraction’
Among agricultural commodities, the gains were less marked, but broadly there nonetheless, amid some anticipation of some statistical fare from the US Department of Agriculture for a market which, it appears, is getting rather tired of a diet heavy on weather watching.
At Halo Commodity Company, Tregg Cronin said: “Our markets are grasping for news, which sounds odd to say given we just received a production report” from the USDA, ie the Wasde briefing, a week ago.
“News is sparse and what does float around the trade is attached to a weight,” said CHS Hedging, thinking in particular of corn.
Tobin Gorey, at Commonwealth Bank of Australia, said that “the market’s focus will revert to the weather, but the publication of US export sales data tonight will provide a welcome distraction from meteorological meditations”.
Sales estimates
Not that investors are expecting fireworks on the US export sales front for last week, broadly expecting a small improvement from volumes the week before.
Markets expect US wheat exports to come in at 250,000-450,000 tonnes, compared with 288,203 tonnes last time.
For corn, forecasts are ranged between 450,000-650,000 tonnes, compared with 519,685 tonnes.
And for soybeans, export sales are expected at 1.0m-1.5m tonnes, compared with 1.28m tonnes last time.
Palm gains
Still, for soybeans at least, that would be a good result, helping catch-up after a poor start to 2015-16, and improving the odds of matching a whole-season hurdle which the USDA lowered by 50m bushels in the Wasde.
Indeed, soybean futures for November gained 0.3% to $9.07 ¾ a bushel as of 09:00 UK time (03:00 Chicago time), recovering most of the gains of the last session, and remaining above their highest levels of the past two months.
As an extra help, elsewhere in the oilseed complex,palm oil gained 0.6% to 2,332 ringgit a tonne in Kuala Lumpur, helped by news that Malaysia will keep at zero its export tax for November for a seventh successive month.
The country, the second-ranked palm oil producer and exporter and Indonesia, imposes taxes (of 4.5-8.5%) when prices exceed a reference level of 2,250 ringgit a tonne.
But the reference price for November was calculated by officials at 2,174.36 ringgit a tonne, equivalent to a bit over $520 a tonne.
‘Wetter forecast’
Back in Chicago, wheat futures for December nudged higher too, by 0.2% to $5.03 ½ a bushel, keeping just ahead of their 50-day moving average, besides the psychologically important $5.00-a-bushel mark.
Not that there seemed a huge appetite for taking prices higher, given – reverting to weather – the idea of improved rainfall for the dry southern Plains, where dryness has been raising concerns over the establishment of newly-seeded crop.
“A wetter forecast next week has begun to ease the US southern Great Plains dryness worries,” said Terry Reilly at Futures International.
‘Unlikely to bid prices higher’
CBA’s Tobin Gorey said that “weather forecasters and models both suggest some relieving rainfall in the next week or so.
“The trade, consequently, is unlikely to bid prices higher when a still nascent problem might be eliminated by a single rain event.”
In Kansas, the top wheat-producing state, the proportion rated in drought remains small, at 4.5%, according to official data on Thursday.
But in neighbouring Oklahoma, the figure ticked higher week on week by 5.5 points to 28.3%.
Rapid harvest pace
It was left to corn again to wear the dunce’s hat in early Chicago dealing, shedding 0.2% to $3.74 ¾ a bushel for December delivery, underperforming soybeans as seasonal factors often dictate, and hitting its lowest for more than a month.
“The Corn Belt is in a dry period this week which will allow harvest to advance nicely,” said Futures International’s Terry Reilly, and open harvest is more of an issue for corn than soybeans, given that for the oilseed it is approaching its end game.
He also said that “weak exports are weighing on the market – US cash bids at the Gulf have decreased on the weak demand”.
And is there some sign of an uptick in producer selling behind the drop in basis too?
‘Focused on spreads’
One factor that investors are increasingly zooming in on is the US cash market, and looking for any signs of an uptick in selling by producers as they look for cash, or run out of storage space as a large corn harvest (after a large soybean harvest) approaches an end.
Steve Freed at ADM Investor Services noted potential weight on prices from “concern that US farmers may sell the end of the harvest if they run out of storage”.
Halo’s Tregg Cronin highlighted a nuance of a “fair amount of focus on calendar spreads as of late with harvest in full-swing and storage quickly being maxed out”, with an uptick in farmer selling from the field likely to affect spot prices more than those further ahead.
“Traders and farmers alike seem focused on corn spreads given the farmers’ propensity to store corn and sell soybeans off the combine this year,” Mr Cronin said.
Still, he added that “with harvest progress west of the Mississippi River not even 30% complete as of Monday in any major corn producing state, the spillover selling doesn’t seem to have occurred yet.”
And the March 2016 corn contract was actually faring worse than the December 2015 one, easing 0.3% to $3.85 ½ a bushel in early deals.
