(Agrimoney) – The day’s first set of major export data proved supportive to agricultural commodity prices.
Will the second?
Palm oil futures extended their rebound in Kuala Lumpur helped by data from cargo surveyor Intertek showing Malaysia’s palm exports soaring 30%, month on month, in the first 25 days of September.
That implied an acceleration in exports, with the growth rate for the first 20 days of the month coming in at 21%, and showed strength in particular to shipments to the European Union, which doubled to 260,140 tonnes.
Tighter signs
Malaysian exports are being boosted by a decision by authorities to ditch export duties for this month and next, in an effort to boost trade in an important source of revenue for the country, but futures in which hit a five-year low of 1,914 ringgit a tonne early this month.
Palm oil futures on Thursday stood at 2,192 ringgit a tonne as of 09:15 UK time (03:15 Chicago time), up 1.8% on the day and extending their recovery from the early-month low to 14.5%.
The bounce is also being fuelled by ideas of a downturn in Malaysian output, with the Malaysian Palm Oil Association producers’ group estimating volumes down 12.2% in the first 20 days of September.
Typically, production hits a seasonal peak this month or next, but looks like it may have hit an early top this year.
From technical perspective, futures are also gaining support from their move back above a series of moving averages, the latest being the 50-day which, on a continuous chart, the December contract closed above in the last session for the first time in six months.
The 10-day moving average crossed upwards through the 40-day moving line too.
Data later
As for the next set of big export numbers, they will come from the US, with weekly crop trade data.
There is particular focus on what the US Department of Agriculture statistics will show on export sales for soybeans.
The market is in for a strong number, after some big sales to China last week already reported through the USDA’s daily alerts system.
But how big?
A poll of brokers suggests expectations of a figure of 1.50m-2.70m tonnes, but some are talking far bigger numbers.
4m tonnes?
At Benson Quinn Commodities, Kim Rugel noted “market estimates as high as 4.0m tonnes, which would be marketing year high” for 2014-15.
“It will probably take an export sales number north of 4.0m tonnes, though, to have more than nominal impact on price action, as most of what is expected in the export sales report is already known,” given the already-reported Chinese purchases.
For corn, sales are expected at 600,000-900,000 tonnes, compared with 660,000 tonnes the previous week.
For wheat, US export sales are expected at 350,000-500,000 tonnes, implying an increase from the 314,352 tonnes last time.
The data, which cover the week to September 19, would not include the weekend order by Egypt of US soft winter wheat, nor the cargo market rumour suggests has been purchased this week by Nigeria, with Brazilian buyers also said to be on the prowl for hard wheat.
Greenback strength
Perhaps a surprise is that the better export talk, although less so for corn, is coming at a time of strength in the dollar, which set a fresh four-year high on Thursday against a basket of currencies.
A stronger dollar tends to undermine prices of dollar-denominated commodities by making them less affordable to buyers in other currencies.
Still, as Jerry Gulke, president at Chicago-based broker Gulke Group noted, taking a more bullish view, “on the flip side, the longer a buyer waits, the higher priced the commodity is getting”, thanks to dollar strength, and potentially leaving buyers to turn to export origin deemed less reliable than the US.
Certainly, US prices were on Thursday getting a boost from a stronger dollar and higher futures values, which extended their consolidation to a third session.
‘Large disparity’
Soybeans for November added 0.4% to $9.40 ½ a bushel, also helped by continued concerns over the USDA’s acreage estimate, which data last week from the Farm Service Agency, drawn from farmer filings, suggested may be too big – although, it must be repeated, there is some dispute about that.
“The seemingly large disparity in USDA acreage and FSA planted acreage data may be behind the market recent consolidation,” Benson Quinn Commodities’ Kim Rugel said.
Informa and Morgan Stanley are among commentators which have lowered their estimates for US corn and soybean plantings following the FSA report.
If Informa’s harvested acreage estimate of 82.9m acres proves right, despite being 1.2m acres below the USDA number, “US national soybean yield would have to increase to 47.2 bushels per acre in order to maintain ending stocks outlook at USDA’s 475m bushels”, Ms Rugel said.
“I think the market is trading at a 47+ bushels-per-acre soybean yield, but the ‘what if’ on acres does not necessarily expand the US carryout and I think that may be holding up the market till more nationwide yield data comes in.”
Yield ideas
And as for the yield data, there was some, at last, which was less than huge, with Mike Mawdsley at broker Market 1 in Iowa, the top corn and soybean producing state, reporting that he had heard of “one field in the30s bushels per acre” in terms of soybean yield.
(He had also heard of one in the 60s bushels per acre.)
“In our local area, we will see some fields that had ‘issues’ this year,” he said, adding that it was “still too early to get a trend”.
“In the meantime, I keep reading what others are saying – 250+ bushels-per-acre corn, 70+ bushels-per-acre soybeans…”
Grains gain
Corn rose 0.3% to $3.30 ½ a bushel for December, defying too some soft US ethanol production data unveiled on Wednesday.
And wheat for December gained 0.4% to $4.82 a bushel, taking some further support from a small sale, of 23,600 tonnes, of US supplies to South Korea-based Korea Flour Mills.
There appears to have been something of a pick-up in wheat import activity over the past week, with Egyptian tenders being followed up by quests by the likes of Ethiopia, Morocco and United Arab Emirates for large volumes.
Furthermore, there are signs of a retreat in producer selling of Canadian and US spring wheat, with the cancellation of receipts against Chicago futures also viewed as a positive.
That said, it is important to add a caveat amid the price gains, with many commentators believing this is only a temporary rebound.
One US broker, for instance, said: “Many market participants believe we are coming to a market bottom.
“To be clear, we still believe we are in a bear market, especially for soybeans.”
