(AgriMoney) – Grain traders had a couple of adages to ponder. One is “new month, new money”, the idea that a fresh month brings an influx of fund cash, a positive sign for prices. The other is that “if bulls have the Thanksgiving feast, bears will have the Christmas dinner” (or vice versa). That was more of a mixed signal, with the pre- and post-Thanksgiving sessions proving strong for wheat, OK for corn and poor for soybeans.
Oil tumbles
Whatever, it was the bears that were munching on Monday, as more urgent priorities – notably the continued fall in oil prices – pressed on agricultural commodity pricing decisions. Sure, there is an argument that the drop in oil prices, spurred by Opec’s refusal to cut production below 30m barrels a day, could be positive to ags, in boosting economic growth, with energy costs cheaper. But a major idea in commodity market is that raw material prices are boosted by high inflation – which is not something that tumbling oil will encourage. (And oil indeed continued its decline, with Brent crude down 2.4% at $68.45 a barrel as of 08:40 UK time (02:40 Chicago time), having earlier hit $67.82 a barrel for the first time in five years. Since October 2009, in fact, as the world was recovering from the depths of its financial crisis.)
China data
And that was not all investors had to worry about. Monthly data on Chinese factory activity, through the monthly state-sponsored purchasing managers’ index, came in at 50.3 for November, down 0.5 points month on month, and the lowest reading since March – if above the 50.0 level, and so indicating expansion. China is a big importer of commodities, including cotton, soybeans and rubber as well as oil. Rubber for May indeed dropped 2.0% to 196.20 yen a kilogramme in Tokyo, pressed also by the fact that crude is the source of synthetic alternatives.
Palm plunges
And then there were some poor statistics on Malaysian palm oil exports to factor in. Cargo surveyor Intertek Testing Services pegged the drop in shipments of the vegetable oil, and palm products, last month at 9.8%. That implies a poor end to the month, with the rate of decline running at 2.9%, month on month, as of November 25, according to Intertek. The soft data comes despite Malaysia having cut to zero its duty on palm exports. At Futures, International, Terry Reilly flagged “a rumour floating around that an Indian importer defaulted on 30,000-60,000 tons of crude palm oil“. Palm oil futures stood 3.6% lower at 2,093 ringgit a tonne in Kuala Lumpur, having hit 2,083 ringgit a tonne earlier, their lowest since September. On the chart, the contract “gapped” lower, ie with its intraday high clearly below the low of the last session, which will be of interest to technical investors. Palm oil too is vulnerable to changes in oil prices, with a major use of the biofuel being in making biodiesel.
Chart signals
Against that background, then, it was little surprise that the big Chicago ag contracts were lower too, especially soyoil, a rival vegetable oil to palm oil, which tumbled 2.2% to 31.59 cents a pound for January delivery, setting a contract low. And soymeal continued to soften, by 0.8% to $388.00 a short ton for December delivery and 0.8% to $363.50 a short ton for January, Terry Reilly at Futures International noted that, in the last session, “January soymeal made a nice technical head and shoulders formation”, a negative signal. Brian Henry at Benson Quinn Commodities said: “From a technical standpoint, the soybean market is wounded. “All three components of the soybean complex are hinting that near-term tops have been formed, and of lower prices before finding lasting support.”
Sparse rainfall
Soybeans themselves actually didn’t do too badly in falling 0.6% to $10.16 ½ a bushel for March delivery, finding some support at the contract’s 40-day moving average. One factor in their favour is strong US exports, even at higher prices, with data on Friday showing weekly US export sales at 1.49m tonnes, well above market expectations. It may also have been some help that rainfall in Brazil over the weekend “was slightly below expectations”, according to MDA, not such as positive sign for soybean seedings and seedlings. “Expected showers will continue to improve soil moisture in Parana, Sao Paulo, Minas Gerais, and Goias benefiting corn and soybeans,” the weather service added.
Corn dips
In fact, Chicago corn underperformed soybeans, dropping 1.2% to $3.84 a bushel for March delivery. Corn is linked to energy prices through the use of much of it in the US for making bioethanol. In fact, “while spot ethanol margins remain profitable, quite profitable in fact, the selloff in the energies should limit gains in the corn market over time”, Mr Henry said.
‘Not buying into this’
The most intriguing pit was that of wheat, which found a stack of support in the last session on concerns over Russia, both from the perspective of dryness stunting winter grain development and raising the prospect of winterkill, and of some talk of measures to limit the country’s grain exports, on phytosanitary grounds, or through an export tax. Not, it has to be said, that the idea of lower Russian grain shipments was universally accepted. Mr Reilly, noting the speculation, said that “we are not buying into this until we see it”. Mr Henry said that an export tax “would also seem premature as inflation related to a lack of supply doesn’t seem to be an issue”.
‘Modest multiple crop concerns’
As for Australian concerns, stoked on Friday by a downgrade by CBH to its forecast for the Western Australian grains harvest, and some alert over quality too, there are forecasts for further rain in “a few Australian sub-regions early this week”, Tobin Gorey at Commonwealth Bank of Australia said. “That may reduce grain quality,” with rainfall encouraging sprouting among ripe kernels. “Traders had modest multiple crop concerns,” with quality already an issue in the likes of Canada, France and Ukraine, “and right now events are bolstering those concerns”. Still, the negative forces in the market depressed wheat too, but 1.2% to $5.76 ½ a bushel for Chicago’s March contract.
