Cocoa, palm oil depressed by downbeat data

(Agrimoney) – The week’s slew of agricultural commodity data did not end with the US Wasde crop report.

Thursday has already brought two key reports, neither of which were helpful for bulls, and there are more statistics to come too.

The European Cocoa Associations revealed that European cocoa grindings for the January-to-March period were, at 340,735 tonnes, up just 0.4% year on year, a far smaller increase than the 3% or so that investors had been looking for.

Cocoa for May stood 1.1% lower at £1,861 a tonne in opening deals in London.

And in palm oil, the Malaysian Palm Oil Board revealed a surprise 1.9% rise in Malaysian inventories of the vegetable oil last month, rather than the decline that traders had forecast.

The rise reflected a jump in output of 17.3%, nearly twice that which investors had expected, if in line with rumours earlier in the week that a producers’ association was thinking of a high number.

It was hardly supportive for prices, although Kuala Lumpur palm oil for July had stemmed losses to just 0.2% as of 09:20 UK time (03:20 Chicago time), taking it to 2,607 ringgit a tonne.

Weighing on soy

That in turn added to the downward trend elsewhere in the oilseed complex in Chicago soybeans evident late in the last session.

Although the US Department of Agriculture’s Wasde report was viewed as bullish for soybeans – in cutting the estimate for domestic stocks at the close of 2013-14 to 135m bushels, matching the lowest on record compared with use – futures jumped eight-month highs only to lose most of their gains by the close.

The retreat was blamed largely on profit-taking, which affected grains too.

Early on Thursday, Chicago soyoil for May shed 0.7% to 42.60 cents a pound, weighed by rival vegetable oil palm oil, while soybeans themselves for May were 0.5% down at $14.87 ¾ a bushel.

China question

Not that this is all that was going against the oilseed, with Benson Quinn Commodities noting that the market is “overbought”, adding that “fears of weaker cash markets also favour lower trade”.

And there were some questions over some of the Wasde estimates, notably over the USDA’s decision to stock by a Chinese soybean import number of 69m tonnes.

“Is that too high?” CHS Hedging asked, with many traders forecasting a number nearer 67m tonnes.

Such concerns were only underlined by a report that Chinese buyers have defaulted on at least 500,000 tonnes of Brazilian and US soybean orders, worth some $300m.

Another China question

The resilience, or not, of Chinese orders overshadowed the corn market too, provoking questions over the USDA’s 125m-bushel upgrade in the Wasde to its forecast for US exports of the grain in 2013-14.

“The implication may be that USDA expects all corn to be shipped to China that has been sold to them,” CHS Hedging said.

This despite the series of rejections of US corn cargos on grounds of containing a genetically modified variety, Syngenta’s MIR 162, as yet unapproved by Beijing.

“Is MIR162 approval on deck? Stay tuned,” CHS said.

Chicago corn for May fell 0.8% to $4.98 ¼ a bushel, and back below its 10-day moving average.

‘Don’t short wheat’

That was actually more than wheat, which extended its losses of the last session by only a further 0.3%, falling to $6.67 ¼ a bushel for May delivery.

Certainly, the Wasde was downbeat, in raising the estimate for world stocks by 2.9m tonnes, while the weather outlook has turned a little wetter for the drought-hit US southern Plains winter wheat belt.

But Benson Quinn Commodities also highlighted “concerns about a drier weather pattern in the European Union, which extends to portions of Ukraine, are growing.

“The 6-to-10 day model runs indicate below-normal precipitation for key regions of the EU, Ukraine, southern Russia and China.”

Furthermore, Richard Feltes at RJ O’Brien cautioned that spring rallies in Chicago, July, futures “of 50 cents a bushel or more are common, thus I advise against shorting wheat.

Although the late development of the US crop, caused by the harsh and long winter, “should minimise the risk” to seedlings from a late spring frost, “the lowest rated US winter wheat crop nationally in 12 years will keep bears sidelined until more is known about the spring hard red winter wheat moisture pattern”.

Data later

Still, there is yet more data to come, in part in the form of US weekly export sales data, expected to come in at 250,000-375,000 tonnes for old crop wheat, and 150,000-300,000 tonnes for new crop.

For corn, sales of 700,000-900,000 tonnes are forecast for 2013-14, and up to 200,000 tonnes for next season.

For soybeans, traders expect old crop sales of up to 150,000 tonnes, and new crop volumes of 100,000-300,000 tonnes.

Furthermore, Brazil’s Conab bureau will unveil updated estimates for domestic crops, with corn and soybean estimates likely to be particularly closely watched.