AM Markets: Soybean Futures Halt Decline in China, to Relief of Chicago

(Agrimoney) –  There was some modestly upbeat news around for agricultural commodity bulls around to start the week.

Particularly for soybean investors, with futures on the Dalian exchange in China, the top importing country for the oilseed, closing higher for only the second time in 13 sessions.

Not that the gains were huge, with the January contract settling just 0.1% higher at 3,630 yuan a tonne.

But it was some relief for soybean bulls worldwide, after the Dalian losing streak, which had cost futures prices 7% from an October 11 high, undermined by harvest pressure, and by talk that China may suspend state purchases of the oilseed, or cut the purchase price.

China’s stocks dwindle

The overnight price recovery followed data from Cofeed signalling that Chinese crushers are faring well in consuming all of the huge volumes of soybean imports entering the country.

Stocks at Chinese ports, which hit some 750,000 tonnes over the summer, have fallen back nearly to 600,000 tonnes, their lowest since May.

Meanwhile, the US harvest is nearing completion, removing harvest pressure, with US Department of Agriculture data later expected to show progress at 85% complete, bang in line with the average pace, according to Richard Feltes at RJ O’Brien.

Soybean futures for January stood up 0.6% at $9.92 ¾ a bushel as of 09:45 UK time (04:45 Chicago time).

‘End moisture stress’

The gains defied some upbeat ideas on Brazilian weather, with Commodity Weather Group saying that “rains should end moisture stress for nearly all Brazilian soybeans”, and corn, coffee and sugar cane crops too, “in the next 10 days with minimal flooding risk”.

Tobin Gorey at Commonwealth Bank of Australia said that “weather forecasters expect Brazil’s Mato Gross to receive some useful rain this week.

“Farmers have delayed planting in the region because of dry soils but that should improve this week.

“The market still has a small premium to lose if this worry is alleviated.”

La Nina worries

However, also supportive to soybeans were weekly data on hedge fund positions showing a sharp sell-off in Chicago soybean and futures, meaning less unfulfilled selling pressure in the market.

And there were gains in vegetable oils, with December soyoil futures adding 0.6% to 35.05 cents a pound in Chicago, setting a six-week high, and helped in turn by grains in rival palm oil.

Palm oil for January added 0.7% to 2,837 ringgit a tonne in Kuala Lumpur.

Oriental Pacific Securities flagged support to palm oil prices from “stronger export demand”, as signalled by data from cargo surveyors, besides by worries of a return of La Nina weather pattern that “could hurt production”.

South East Asia tends drier during La Ninas, crimping oil palm yields.

Dollar eases

Furthermore, in good news for investors in US markets across the board, the dollar lost a bit of the ground gained last week, easing 0.2% against a basket of currencies and so improving the affordability of dollar-denominated assets.

Last week’s dollar rally has “given the competition [to the US] an advantage they didn’t need in the first place”, US broker Benson Quinn Commodities said, talking of grain export rivalry.

In corn, that helped December futures nudge 0.1% higher to $3.49 ¼ a bushel, defying some of the downbeat talk spurred by the dollar’s rally last week.

“The dollar’s strength means the December contracts season lows, $3.42 ½ a bushel, might be tested again,” CBA’s Tobin Gorey said.

While the “market has found significant buying on a couple of occasions around that level”, with the dollar higher, “we wonder whether that support is still there at the level or is now a shade lower”.

‘Won’t drift too far’

In wheat, the Chicago December contract extended its decline, but not by much, easing 0.1% to $4.27 a bushel.

Indeed, on a more upbeat note on prices, Benson Quinn Commodities said that “I have doubts that the corn market is going to drift too far from the $3.50-a-bushel level, because it will make it more difficult to get corn bought” from farmers.

“I also have doubts that the winter wheat markets would push much below the $4.20-a-bushel level.”

As a sign of low prices spurring end-user demand, Ethiopia doubled to 400,000 tonnes the size of its wheat tender for November 28.

And Saudi Arabia bought 484,000 tonnes of wheat at tender, at prices from $221.51-229.58 a tonne on a C&F basis.