(Agrimoney) – At last, a piece of less gloomy Chinese economic data.
HSBC’s “flash” purchasing managers’ index for China came in at 50.5 for this month, up from 50.2 in August, and the figure of 50.0 that investors were expecting.
A reading above 50.0 shows expansion.
That followed a series of signals, from the likes of retail sales and property market slowdowns, of weakening economic growth.
And it gave a bit of cheer to Shanghai shares, which closed up 0.9%, besides offering a little support to commodities, of which China is the top buyer of many.
After all, the investor community has been “turning sour on commodities in the wake of anaemic Chinese economic growth”, said Richard Feltes at Chicago broker RJ O’Brien.
Turnaround Tuesday?
Soybeans, one of the raw materials in which China is the biggest importer, gained 0.2% to $9.40 ½ a bushel in Chicago for November delivery as of 03:30 UK time (03:30 Chicago time), according with something of a Turnaround Tuesday – the idea among grain traders that a strong trend on the first day of the week is reversed on the second.
For soybeans, after their drubbing in the last session, the Turnaround Tuesday theme would dictate a rise in this one.
Still, it was not as if there appeared a huge change of sentiment, in terms of the consensus thinking that prices will continue to fall as the US harvest gathers pace.
Harvest time typically sets a low in prices for a crop as it allows the removal of the last vestiges of risk premium and brings a spike in supplies which shifts some market power towards buyers.
Condition rating falls
In fact, there was a smidgen of somewhat bullish news in that the US Department of Agriculture’s condition rating for the domestic crop eased 1 point in the week to Sunday, to 71%, in terms of the proportion viewed as in “good” or “excellent” health.
Not that this should be of too much concern to farmers, being one of the strongest ratings on record for the time of year, and hardly dents hopes of a continuation of the strong yields reported from the early US harvest.
“Harvest weather looks favourable and the market knows that a record amount of grain in the field has yet to be sold,” one US broker said, noting also that “private national average yield estimates have increased.
“Some have corn above 180 bushels per acre and soybeans above 50 bushels per acre” in yield terms.
‘Pressure abounds’
Indeed, at Benson Quinn Commodities, Kim Rugel cautioned against reading too much into a rebound in soybean prices.
“There is a lot of harvest activity to come and trade sees nothing to signal that yields will be anything but stellar for most of the Corn Belt,” she said.
While the market “is technically oversold and could lead to dead cat/Turnaround Tuesday bounce, pressure abounds and any strength will be met with fresh catch-up selling.
“Any type of correction will be shallow in the short term.”
Falling basis
Besides, there are signs of harvest supplies actually making it to end users, with Futures International noting that yesterday “US processors across the country were lowering soybean basis bids”, and by $0.60-0.65 per bushel.
And the ratio of soybean to corn futures, on a November:December basis, for both 2014 and 2015 looks elevated, especially given wide expectations that South American growers are favouring the oilseed very much in their sowings programmes over the grain.
For 2015, “it is still at a rather lofty level at 2.53:1 but well below the highs of 2.67,” one broker said.
“As prices get cheaper, we see the potential for this ratio to decline meaning soybeans will outpace corn lower in a bear market.”
‘Warm conditions forecast’
… but not in early deals on Tuesday, when December corn was 0.3% down at $3.29 ¼ a bushel, although it has yet to set a fresh four-year low.
The USDA crop condition data showed US corn remaining at 74% rated good or excellent for a fourth successive week, the best reading in 20 years for the time of year.
While corn harvest is slow, at 7% complete compared with the typical 15% by now, decent weather is expected to help speed up the process.
“With warm conditions forecast this week, look for the corn crop to dry down,” said Futures International lifting to 173.3 bushels per acre, from 171.5 bushels per acre, its forecast for the US corn yield.
Planting catch-up
Wheat struggled too this time, easing 0.3% to $4.75 ¼ a bushel in Chicago for December delivery, with the crop progress data showing farmers making progress on getting spring wheat harvest in the barn, with 86% completed, up 12 points week on week.
That was better progress than investors had expected, and reduced the lag to the average pace to 6 points.
Meanwhile, winter wheat plantings hit 25% complete, 3 points ahead of normal, although this figure was swayed by an astonishing start to plantings in Oklahoma, already 35% finished – 20 points above the average.
Palm revives
Among soft commodities, the USDA crop progress data showed some further deterioration in the US cotton crop, with the proportion rated good or excellent down 1 point at 48%.
That helped New York’s December cotton budge 0.02 cents higher to 62.61 cents a pound in early deals, recovering a small part of ground lost in the last session on the announcement by China of minimum import quotas.
Meanwhile, back in the oilseeds complex, palm oil for December was 1.7% higher at 2,126 ringgit a tonne in Kuala Lumpur, rebooting its rebound.
The vegetable oil – another big Chinese import – was lifted in part by a softer ringgit, boosting the competitiveness of Malaysian shipments, but also by the boost to exports from a government decision to remove, temporarily, palm export duties.
Cargo surveyor data showed Malaysian palm exports rising 21%, or 26%, in the first 20 days of September.
