(Agrimoney) – Grain futures extended their recent rally on Tuesday, with ideas of heavy interest from China, while cocoa prices in New York hit their highest level since the start of the year.
Macro markets lent some support, as the dollar weakened against other currencies. The US Federal Reserve is about to hold a two day meeting, which is expected to be followed by an announcement that interest rates will not be raised.
The dollar was down 0.3% against a basket of major currencies in afternoon deals.
And oil markets were stronger, with June Brent crude futures up 2.8%, although the contract is finding resistance on at the 200-day moving average.
Funds still in driving seat
There was little fundamental news inside grain markets to drive prices higher.
But, as in recent sessions, it was fund buying that was the main topic of discussion among the trade.
“Funds showed yesterday they have no interest in exiting our space that quickly, especially as 2016 growing season volatility is just getting started,” said Tregg Cronin, at Halo Commodities.
Chinese buying
“Fund money is very prevalent on every price break,” said Darrell Holaday, at Country Futures.
“Much of the talk is about Chinese trading funds that continue to buy raw commodities because of the large money supply that is being pumped into the Chinese economy by the Chinese Central Bank,” said Mr Holaday.
Paul Georgy, at Allendale, reported the “traders point to a single entity buying large volumes across the grain and soybean complex on Monday”.
US crop report has few surpises
The US Department of Agriculture’s latest crop report put corn planting at 30% complete, marginally behind market expectations.
Soybean sowings were 3% complete, compared to 2% at this point last season.
And ideas for the condition of winter wheat were boosted as well.
Argentine flooding damage fears firm up
There was, at least, a touch of fundamental support as an analyst lent support to ideas of the South American weather disruption that have been supporting row crop prices recently.
The influential analyst Dr Michael Cordonnier cut his ideas of Argentine soybean prospects by a further 2.0m tonnes, to 57.0m tonnes, following a 1.5m tonne downgrade last week.
The cut was prompted by the flooding across much of Argentina’s soybean area in recent weeks.
Brazilian dryness
Dr Cordonnier also said that the harvest has been stalled by the floods over the last three weeks, meaning that only 16% of the crop has been harvested, compared to 46% at this point last year.
July soybean futures were up 1.4% in late deals, to $10.24 a bushel.
Dr. Cordonnier cut Brazilian corn and soybean production to 79m tonnes, and 98m tonnes respectively, citing the recent dry weather.
July corn futures rose by 1.0%, to £3.85 ½ a bushel.
EU prospects raised
Prospects for EU wheat yields were lifted, after favourable weather across the bloc’s main growing regions.
Mars, the EU’s crop monitoring agency, boosted its ideas of EU wheat yields by 0.15 tonnes a hectare, to 6.11 tonnes per hectare.
This is 4.5% above the 5-year trend for wheat yields, although it represents a fall from the 6.26 tonnes per hectare yields seen last year.
“Crop growth conditions have been good in most regions of Europe,” Mars said.
March wheat futures in Paris fell by 0.8%, to finish at 151.00 a tonne.
July Chicago wheat futures rose by 1.7% in late deals, to $4.86 a bushel.
Sterling rally supports cocoa
Cocoa futures extended their rally on Tuesday, hitting their highest levels since the start of the year.
New York cocoa futures were driven higher by the rallying pound sterling, helping New York futures gain against the sterling-denominated contract traded in London.
Cocoa futures have been gaining strength by a disappointing end to the West African cocoa main crop, after a fierce winter harmatten, and fears over prospects for the mid-crop.
July New York cocoa settled up 1.4%, at $3,211 per tonne, the highest level since January 4.
Currency, El Nino fuels sugar
And sugar futures rose in a choppy day’s trade, despite the fact that the Brazilian cane body Unica is expected to come out with some hefty production numbers tomorrow.
Thomas Kujawa, at Sucden Financial, noted that in macro markets the “commodity bull story seems to be continuing with conjecture seemingly increasing in volume regarding the economic prospects in China, further talk of interest rate hikes earlier rather than later and the realisation the impending La Nina will be just as severe as the recent El Nino”.
La Nina, a seasonal effect that can follow on from an El Nino year, can cause dry weather in Brazil, the world’s top sugar grower.
And additional support from Brazil came as the real rose 0.9% against the dollar, which will make Brazilian product less available in dollar terms.
July raw sugar settled 1.0% 16.05 cents a pound.
