AM Markets: Grains Nudge Higher, in Holiday-Thinned Trade

December 29th, 2016

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Category: Grains

Bulls-and-Bears---Main(Agrimoney) – In the topsy turvy world that is year-end, holiday-thinned agricultural commodity trading, bulls grabbed the initiative again in early deals.

Not that bears lacked any cause for hope that prices may fall anew.

In soybeans, for instance, early yield reports from the Brazilian harvest are coming in strong.

“Harvest of early beans is progressing in central Brazil with early yields reports better than expected,” said Benson Quinn Commodities, downplaying Brazilian weather worries too.

“There is some concern for developing dryness in northern and eastern Brazil but area of concerns covers about 10% of Brazilian bean production and if rains return in next week to 10-days, little harm is expected,” the broker said.

‘Margins down pretty substantially’

Meanwhile, thinking of Argentina, Joe Lardy at CHS Hedging flagged that “reports of flooding were not as bad as initially thought.

“There is still one-quarter of the crop left to plant and most of the flooding took place in Western Argentina,” he added.

And, on the demand side, soybean crush margins are thinning, in both the US and China.

“Chinese and US crush margins have fallen off pretty substantially since October,” Mr Lardy said.

“The Chinese have a tidal wave of beans coming at them and margins have really dropped. Not low enough to stop buying, but not strong enough for them to buy at any price.”

Soybeans revive

Still, soybean futures traded strongly overnight on China’s Dalian exchange, where the best-traded May lot settled 1.7% higher at 4,291 yuan a tonne, an apparent indication of demand in the top importing country.

And, as an extra help to Chicago soybeans, the dollar fell back too, by 0.4% against a basket of currencies, so boosting the affordability of dollar-denominated assets such as many agricultural commodities.

Chicago soybeans for March stood 0.2% higher at $10.18 a bushel as of 08:30 UK time (02:30 UK time).

Gains might have been bigger were it not for weakness in the soyoilmarket, where the March  contract dropped 0.7% to 34.87 cents a pound, weighed by a poor performance by rival vegetable oil palm oilin  Kuala Lumpur.

End-of-year profit-taking took the benchmark March palm oil contract down 1.4% to 3,087 ringgit a tonne.

‘Bitter cold air’

Indeed, back in Chicago, grains managed to make a little better use of the falling dollar, with wheat for March adding 0.4% to $4.03 a bushel, helped too by a positive demand sign, at a time when the spread of bird flu is undermining hopes for feed use of grains.

Gasc, grain authority for Egypt, the top wheat importing country, announced a tender which will be settled later on Thursday, and give an insight into world prices.

That said, “Black Sea origins should be competitive, once again,” Agritel said.

Furthermore, there are some fresh concerns over cold weather hitting the US.

“A surge of bitter cold air will begin to push southward from Canada and the northern Plains early next week,” said Terry Reilly at Futures International.

“The cold snap will reach Colorado and Nebraska, where more snow is needed to protect the winter wheat crop from single digits” temperatures, in Fahrenheit terms.

‘Pricer of corn’

Corn was higher too, adding 0.3% to $3.49 ¼ a bushel, and maintaining its cycle around the $3.50-a-bushel or so mark.

Ideas of farmer selling are curtailing upward movement, with Benson Quinn Commodities noting that the US producer had been a “pricer of corn” this week, “taking income at year end and pricing corn off storage”.

Furthermore, there remain worries that China is poised to up the levy on imports of US ethanol, and so protect domestic production at a time when Beijing is trying to encourage domestic corn processing.

“China’s China Alcoholic Drinks Association expects the import tariff on ethanol to go back to 30%,” Mr Reilly noted.

 

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