Heat fears extend rally in South Africa corn

February 16th, 2015

By:

Category: Grains, Oilseeds

corn-planted-acres(Agrimoney) – With Monday a US holiday, and the start of a week which witnesses Brazil’s Rio carnival and China’s new year celebrations, trading was understandably quiet in early deals in most markets.

But what was trading in agricultural commodities was mostly upwards, with rubber, for instance, adding 0.6% to 221.70 yen a kilogramme in Tokyo for July delivery – the highest close since early April last year.

The rise came despite some somewhat disappointing Japanese economic growth data, although the statistics at least confirmed that the country (important for rubber given its large car industry) had pulled out of recession in the October-to-December quarter.

Japanese GDP rose by 0.6% quarter-on-quarter, below economists’ expectations for a 0.9% increase, according to official statisticians, who also revised the figure for the July-to-September period to contraction of 0.6% from a previous figure of 0.5% shrinkage.

Oil price influence

Still, Tokyo shares rose by 0.5%.

And the rubber market had not had the chance to react to Friday’s soaring oil price, when Brent crude jumped nearly 8% to its best close since Christmas. (Oil is important to natural rubber markets as it is the source of synthetic alternatives.)

OK, Brent crude saw a bit of profit-taking on Monday, with prices down 0.9% to $60.95 a barrel as of 09:00 UK time (03:00 Chicago time).

But there was still some vacuum for Tokyo rubber futures to fill.

And they were given extra encouragement by Shanghai futures which rose 2.1% to 14,090 yuan a tonne for May, albeit in thin trade ahead of the Chinese holiday, which starts on Wednesday.

Many Chinese markets found support ironically in weak data, showing broad money supply at a record low of 10.8%, but which raised hopes for an easing in monetary policy.

Malaysia tax

The oil markets influences prices too of many other agricultural commodities used in making biofuels.

One such is palm oil, a raw material for biodiesel, which gained an extra boost from news that Malaysia, the second-ranked producer and exporter of the vegetable oil, was not after all to reintroduce a tax on shipments as proposed last week.

The government, which had today been expected to issue details of the tax’s renewal, in fact said it was sticking with a zero duty for March.

Export data conundrum

And it is not difficult to see why, when even without a tax exports are falling at a rate of 6.3% month on month so far in February, according to data by cargo surveyor SGS, after a steep drop in January too.

The SGS data indicated some acceleration in the pace of decline, with exports falling at a rate of 4.2% as of February 10.

That said, data from rival cargo surveyor did show a deceleration in the pace of decline, to 4.9% as of February 15 from 16% as of February 10.

Still, with the higher oil price and tax concession to counter the depressant of uncertainty, palm oil gained 1.1% to 2,312 ringgit a tonne in Kuala Lumpur.

‘Dryness and heat’

That was small beer, though, compared with the gains in Johannesburg on corn futures, which remained supported by concerns over the dent to production prospects from dry and hot weather.

The July contract for white maize (used more in food than feed) rose a further 4.3% to a contract high of 2,890 rand a tonne, with yellow maize (mainly fed to livestock) adding 3.3% to 2,484 rand a tonne, also a contract high.

On a spot basis, the February white maize contract jumped 8.3% to 2,980 rand a tonne, hitting 2,985 rand a tonne earlier, the highest since April last year.

The February yellow maize contract rose 4.8% to 2,510 rand a tonne, after touching its own near-10-month high of 2,525 rand a tonne.

The weather forecast looks unsympathetic, with US-based MDA saying that “dryness and heat will continue to stress corn in north central and western areas” of South Africa’s growing district.

Elsewhere, prospects look benign elsewhere, with “rain to ease remaining dryness” in the centre of Argentina’s key Buenos Aires province, and to reach central Brazil too, where a lack of moisture has remained a bit of a worry.

Still, in the US, warmer weather, which has encouraged snow melt, will be succeeded by a colder spell which offers some threat to wheat, allowing limited winterkill.

Add New Comment

Forgot password? or Register

You are commenting as a guest.