(Agrimoney) – A bit of that Friday 13 feel, which was a negative day for agricultural commodities, carried over into early deals on Monday 16.
Palm oil was one of the worst affected, dropping 1.9% to 2,194 ringgit a tonne in Kuala Lumpur as of 09:20 UK time (04:20 Chicago time), after Malaysia decided to reimpose export taxes.
From April, the tax, which was been at zero since September, will be reintroduced at 4.5% in Malaysia, the second-ranked palm producing and exporting country.
That even after dismal data last week on Malaysian exports, which had their worst month since July 2007 in February.
Biodiesel boost
The news wasn’t all bad for palm oil, with Indonesia saying it will potentially next week bring in regulations raising to 15%, from 10%, the minimum level of biodiesel that must be blended into transport diesel.
(Biodiesel is made from vegetable oils, such as palm oil, of which Indonesia is the top producer and exporter.)
And there was some better news for vegetable oil bulls from India, after the data on Friday which showed India’s palm imports down 23% to 509,948 tonnes last month, undermined by expectations of an import duty cut, ideas which sidelined buyers.
On Monday, the Solvent Extractors’ Association of India said that India’s rapeseed output could fall 12% in 2014-15 to 5.74m tonnes in 2014-15, meaning extra purchases of cooking oils.
At least palm oil futures managed some recovery from an early low of 2,172 ringgit a tonne, their weakest level in six weeks.
Dollar eases
Prices of Chicago-traded grains fell too, despite early softness in the dollar, which eased 0.3% in early deals against a basket of currencies to fall back below an index level of 100.
(A stronger dollar undermines prices of dollar-denominated commodities by making them less affordable to buyers in other currencies.)
Palm oil’s weakness made for a soft start in rival vegetable oil soyoil, which eased 0.3% to 30.40 cents a pound in Chicago for May delivery.
And that was not the only headwind to soybeans themselves, which for May stood down 0.1% at $9.73 a bushel.
‘Record may be within reach’
The oilseed faces pressure from the Argentine harvest, now ramping up, and the Brazilian one, which is roughly half way through.
Analysis group Safras became the latest to downgrade the Brazilian harvest, by 600,000 tonnes to 94.4m tonnes, but that would still represent easily a record high.
Harvest supplies meant that “the monthly record of 8.3m tonnes Brazil’s exports may be within reach after shipments in February were slow due to the trucker strike”, broker CHS Hedging said, also reminding of the potential dent to US consumption of soymeal if the country’s poultry industry wobbles under the pressure of a series of outbreaks of bird flu.
“Concerns remain that more cases of bird flu could decrease domestic soymeal demand.”
‘Right on the uptrend line’
The drop in soybean prices has some technical implications too, with May futures’ negative close on Friday taking seeing them end “right on the uptrend line” on the weekly chart, Mike Mawdsley at Iowa-based broker Market 1 said.
“A failure to stay over the uptrend would likely lead to an eventual test of the October low, at $9.28 ¾ a bushel,” Mr Mawdsley said.
But how much further would hedge funds be willing to extend selling in soybean futures and options?
They reopened a net short position, of more than 17,000 contracts, in the week to last Tuesday, thanks to a heavy selldown.
They have proven in recent years unwilling to raise their net short above 40,000 contracts.
US weather outlook
Wheat, the market leader in Chicago of late, dropped too, even though the investor positioning data, released late on Friday, showed a hefty net short here too, of 67,000 contracts.
The record net short, reached in September, is of just short of 79,000 lots.
Still, there was some easing in dryness concerns in the Plains hard red winter wheat area.
Weather service MDA noted that this week in the Plains hard red winter wheat area “above-normal temperatures will increase soil temperatures”, implying some emergence from dormancy, yet “shower activity will somewhat ease dryness”, just in time if seedlings are resuming growth.
There was some rain over the weekend too, with rains of up to 1.5 inches in the southern Plains, where precipitation is needed.
‘No prospective rainfall’
That said, “the 6-10 day outlook is drier in southern areas versus Friday’s forecast”, MDA added.
And Tobin Gorey at Commonwealth Bank of Australia highlighted the threat yet.
“Weather forecasters are looking for a rainfall event this week but the amount of rainfall may be well be short of alleviating the issue,” he said.
“After that there is no prospective rainfall event until late this month.
“Given prospective temperatures the crop will resume growing soon – or will try to do with very limited moisture.”
‘Lower imports’
Still, elsewhere in the world, conditions are not nearly so worrying.
Traders at a major European commodities house said that a map “showing vegetative growth across the EU, Black Sea and North Africa suggests that crops are generally in better condition now than they were at this stage last year.
“Obviously, it’s early days for crops in Europe and the former Soviet Union,” although it is “clear at this stage that crops in most regions are not suffering from a lack of rainfall and the lack of rain will only become an issue if it continues for several weeks more”.
“But for North Africa, where harvest is only weeks away,” crop condition “does suggest bigger yields and consequently lower imports”.
Wheat for May fell 0.4% to $5.00 ¼ a bushel in Chicago.
‘Talk of corn planting delays’
Corn easing 0.3% to $3.79 ¼ a bushel for May delivery, with a US weather fear – too much wetness in the US South (east of the plains) – not quite yet impinging much on early planting progress.
“There is some talk of corn planting delays in the South, but it’s still too early for any real concern,” CHS Hedging said.
Terry Reilly at Futures International reminded of the touch export markets, saying that “Black Sea corn exports are still running strong, in part to weaker currencies” outside the US.
Ethanol made a soft start too, down 0.4% at $1.439 a gallon for April delivery, pressing on production margins of the biofuel, which in the US is made mainly from corn.
