(Agrimoney) – Phew.
OK, the headlines from China’s economic growth data weren’t great – with expansion at its slowest since 1990.
But a figure of 6.9% was broadly in line with a government target of “around 7%”, and better than many economists had expected.
Certainly, markets broadly reacted well to the data, with shares soaring by 3.3% in Shanghai, and 2.1% in Hong Kong, while opening up 2% in London.
Brent crude stood 2.6% higher at $29.29 a barrel as of 09:20 UK time (03:20 Chicago time).
Brazil question
And some ags gained a following wind from the improved sentiment too although, having proved relatively resilient to broad financial market shenanigans late last week, many were avoided Monday’s recovery too.
Soybeans, of which China is the top importer, did make headway, of 0.8% to $8.86 a bushel in Chicago for March delivery, now the spot contract, and rising convincingly above their 100-day moving average.
It helped that soybean futures on China’s own Dalian exchange rose by 0.7% to settle at 3,619 renminbi per tonne.
Furthermore, in Brazil, rains are reaching Brazil’s key centre west soybean producing region a little later than would have been ideal.
Sure, the precipitation will be a help for less developed crop, which has been suffering from a lack of moisture, but harvest has begun, and the rainfall will be less helpful on this score.
‘Slashed almost in half’
Prices of another major Chinese import, cotton, were also firm, adding 0.7% to 61.84 cents a pound in New York for March delivery, and rebounding back above their 10-day moving average.
This after the near-weakest close to the last session in three months, amid bearish sentiment highlighted by a sharp cut in hedge funds’ net long position, as revealed by data late on Friday.
“Investors slashed their net long positions almost in half,” Tobin Gorey at Commonwealth Bank of Australia noted, saying that the weakness had been fuelled by “speculation that the Chinese government will again attempt to sell some of its 11m tonnes of ageing cotton reserves.
He added: “China’s stockpiles have weighed heavily on the cotton market so a reduction in inventory is essential for a rebalancing of global fundamentals,” although of course potentially a setback for prices short term.
That said, “an earlier attempt to sell Chinese cotton reserves last year though was wholly unsuccessful – only around 3.4% of the government’s 1m-tonne target was sold as too high prices and questionable quality kept buyers at bay”.
Quality cotton is in demand – as highlighted by US weekly export sales data on Thursday which showed 27,100 running bales of Pima cotton ordered by importers, the biggest weekly figure in more than two years.
Ethanol help
Back in Chicago, corn rose too, by 1.0% to $3.66 ¾ a bushel for March delivery, grappling with its 40-day moving average, and putting distance between itself and the psychologically important $3.50-a-bushel mark it looked like it might surrender earlier in the month.
The rise in Brent crude was helpful for a grain of which a huge proportion of the US crop is used for making bioethanol.
Ethanol itself for March was up 0.7% at $1.380 a gallon in Chicago.
World corn prices are also getting support from the idea that South Africa – usually an exporter of the grain to its neighbours – will need imports of up to 6m tonnes, thanks to drought damage to its harvest.
Johannesburg white maize futures on Monday topped 5,000 rand for the first time, although for March they eased by 0.2% to 5,095 a tonne this session.
Yellow maize, which last week topped 4,000 rand a tonne for the first time for a spot contract, stood up 1.3% at 3,996 a tonne for the best-traded, nearest-but-one March lot.
Fund conundrum
Returning to the hedge fund positioning data, that too may be magnifying a willingness to buy corn, showing a record net short in Chicago futures and options built up in the week to last Tuesday.
Extreme positions tend to foster backpedalling by speculators, for fear that further appetite for such bets is running low.
What was also notable was that corn prices rose some 1% in the week to last Tuesday in Chicago – despite hedge funds raising their net short over the period.
‘Argentine wheat heading for US’
For Chicago wheat, the hedge fund position “is more manageable”, Benson Quinn Commodities noted, with the net short cut by more than 25,000 lots week on week.
As an extra negative for prices, there are rumours of Argentine wheat being shipped to US livestock feeders on the east coast, a reminder of the competitiveness of world markets.
“Talk is that a couple of Argentine feed wheat cargoes are expected to make their way to US ports early February, because it is said to be less expensive than US corn or wheat,” CHS Hedging said.
It is worth keeping an eye on the weather, with colder conditions being noted in many parts of the US and Europe, which could cause some crop damage.
Still, overall, “at this point, threats to northern hemisphere wheat production are minimal,” Benson Quinn Commodities said.
Chicago wheat for March stood down 0.3% at $4.72 ¼ a bushel.
