(Agrimoney) – The ag data circus moved on, after in the last session handing Chicago wheat futures a contract low, and cotton a one-year low too.
On Wednesday the statistics – on Malaysian palm oil – had slightly more bullish hue, in showing inventories of the vegetable oil in the second-ranked producing country at 2.31m tonnes, a drop of 12.4% month on month.
That was a bigger decline than the 9.3% drop that analysts had expected, and took inventories to a six-month low.
Futures bounce
The bullish picture was tarnished a bit by separate data from cargo surveyor Intertek showing Malaysian exports of palm oil so far this month down 23% on the same period of January.
That said, with lunar new year celebrations in progress, a big deal for many Asian countries including Malaysia but also major palm importer China, a drop in trade was only to be expected.
Palm oil futures in the Kuala Lumpur market, itself returning after a two-day break for new year, recovered from a 0.4% drop to 2,571 ringgit a tonne ahead of the data to bounce to 2,600 ringgit a tonne, within an ace of 20-month highs.
Still, the contract had retreated by 09.45 UK time (03:45 Chicago time) back to 2,574 ringgit a tonne, a drop of 0.2% on the day, hurt by profit-taking.
‘Overall bearish’
As for the main Chicago grains, they remained somewhat under the weather, as the dust settled on Tuesday’s US Department of Agriculture Wasde crop report which underlined the extent of world grain supplies.
Richard Feltes at broker RJ O’Brien, for instance, termed the briefing “overall bearish”, with the briefing raising estimates for US corn, soybean and wheat supplies above market expectations.
At the world level, world wheat stocks were hiked by 6m tonnes to an even higher record top, while the global cotton inventory number took an unexpectedly large upgrade too, boosted by higher ideas for US supplies thanks to a weaker-than-expected pace of exports.
And, while for corn, South Africa’s harvest was downgraded by 1.0m tonnes, the downgrade was more than offset by upgrades to Argentine and Brazilian harvests.
‘Didn’t react as they should’
Indeed, Chicago corn futures, in showing only modest losses in the last session, “didn’t react as they should have in our opinion after USDA’s February bearish supply and demand report”, said Terry Reilly at Chicago broker Futures International.
Still, the grain did extend losses on Wednesday, easing a further 0.3% to $3.60 a bushel for March delivery.
Rabobank flagged that the downgrades to USDA estimates for US corn exports, cut in the Wasde by 25m bushels to 1.65bn bushels, “may not be finished yet, which would keep prices further under pressure.
“US export sales for corn are 22% down year on year, while the USDA’s full-season export forecast is down 11.5%,” the bank said.
Data later
But where corn futures finish on Wednesday may depend on weekly US ethanol production data later, which Futures International expects to be in line with the 959,000 barrels a day reported for the previous week, or potentially around 5,000 barrels lower.
Ethanol, which is made in the US largely from corn, has actually been one of the bright spots in consumption terms, with the Wasde lifting by 25m bushels to 5.225bn bushels its estimate for US demand in 2015-16.
(US ethanol producers may be relieved that Ted Cruz, vying to become Republican candidate in the country’s presidential elections, and who is against the biofuel mandate, came only third in the New Hampshire primary overnight.)
‘Trade sideways’
Soybeans made marginal headway, helped by a strong performance in soyoil, which added 0.6% to 30.91 cents a pound for March delivery, helped by the recent strength in rival vegetable oil palm oil.
(Vegetable oils are interchangeable in many uses, including in making biodiesel, a major source of demand.)
Soybeans for March edged 0.1% higher to $8.63 ¾ a bushel, albeit with expectations limited of a sustained rally.
“We look for soybeans to trade sideways through the end of March,” Futures International’s Terry Reilly said, foreseeing them remaining within a range of $8.25-8.85 a bushel.
Much may depend on prospects for crops in South America, where Brazil’s harvest is in its early stages, and where the weather outlook looks “favourable”, as it does in Argentina.
Priced in?
Wheat, meanwhile, bounced 0.2% to $4.58 ¼ a bushel in Chicago for March delivery, after on one measure – that of the most traded contract – touching its lowest in the last session since 2010.
Sure, there is ample reason for weak prices, given the huge world inventories.
The question is whether this has been priced in, with the northern hemisphere spring sowing season on the horizon, and southern hemisphere plantings period too, warranting some risk premium.
