Oil spurt bouys ag markets. Soy lead gains

January 22nd, 2016

By:

Category: Grains, Oilseeds

Soybeans take a hit(Agrimoney) – The recovery in soybean futures in the last session was seen by some observers as prompted by a revival incrude oil prices.

Terry Reilly at Chicago-based Futures International was one, saying that “the soybean complex rallied… in part in response to a rally in soyoil stemming from a pop in crude oil”.

So it was perhaps no surprise that, on Friday, as Brent crude bounced a further 5.2% to $30.77 a barrel as of 09:00 UK time (03:00 Chicago time), amid a broad market rally attributed to hopes of fresh central bank support for economies, soybeans made ground too.

Soyoil – which like other vegetable oils such asrapeseed oil and palm oil is used largely in making biodiesel, hence the link to oil markets – gained 0.9% to 30.22 cent a pound for Chicago’s March contract, returning back above its 20-day moving average.

And for that matter, palm oil made ground too, adding 1.1% to 2,448 ringgit a tonne in Kuala Lumpur, also helped by short-covering ahead of a long weekend in Malaysia, which has a public holiday on Monday.

An extra day without being able to trade often prompts many investors to close some positions – especially when markets are volatile, as now.

‘Heavy rain and flooding’

Back in Chicago, South American weather also continues to provide some uncertainty, with Brazil’s conditions remaining polarised, albeit now switched so that it is the central belt which is getting the heavy rains, and the south the undue dryness.

“In Brazil, the weather story remains largely unchanged – too wet in some central and northern regions, increasingly dry in the south,” said Tobin Gorey at Commonwealth Bank of Australia.

Terry Reilly said: “Additional heavy rain and flooding will occur through next week for parts of northern Goias into Bahia and Minas Gerais.

“And hot and dry weather should continue for Paraguay and southern Brazil.”

Brazilian delays

The central Brazilian wetness, while helpful for later-planted crops, is not such a boon for ripe ones ready for harvest.

Indeed, the slow progress means that Brazil’s soybean exports, while expected to come in strong eventually, have not made much of a start, with no arrivals yet of crop for export from the key port of Paranagua.

A year ago, “the first vessel loaded with soybeans left the port by the end of January, but that will not happen this year,” said Michael Cordonnier, the respected row crop analyst.

And the previous season, by the close of December (2013) Paranagua “had already received 122 truckloads of soybeans”.

A slow start to the Brazilian export season in theory prolongs the period when the US holds sway in the international market, a positive for US prices.

US weekly export sales data later will give an insight into whether that trend is actually panning out, and expected to come in for soybeans at 700,000-1.0m tonnes, a little below the strong 1.13m tonnes reported the previous week.

‘Very important rains’

Returning to South America, Argentina remains a factor too, not just for the idea of huge supplies of hoarded soybeans from past crops coming onstream thanks to export reforms, but with the next crop in focus too.

The Buenos Aires grains exchange, in its first forecast for the crop, pegged it at 58.0m tonnes, above the US Department of Agriculture’s 57.0m-tonne estimate, but down year on year.

Will this represent a high water mark?

Terry Reilly noted that “Argentina is battling very hot weather,” with temperatures topping 105 degrees Fahrenheit, 41 Celsius, in south-central Santiago del Estero on Thursday.

“Dry conditions will last through the end of the work week,” although “very important” rains are expected this weekend.

‘Supplies are shrinking’

Chicago soybean futures for March gained 0.4% to $8.82 a bushel, climbing back over their 100-day moving average.

And elsewhere in the complex, soymeal was higher too, up 0.4% at $273.40 a short ton for March delivery, helped by a firm US cash market.

“Western US meal basis is steadily improving and that cash sources report surplus domestic meal supplies are shrinking,” said Richard Feltes at Chicago broker RJ O’Brien.

‘Shortage in corn supply’

Fellow row crop corn returned to winning ways too, having in the last session, weighted by bearish US ethanol production and stocks data, fluffed its chance to record four successive positive sessions for the first time in four months.

Chicago’s March contract was 0.3% higher at $3.68 a bushel, returning back above its 50-day moving average.

Strong oil prices helped, for a crop used in the US largely for making ethanol.

And Brazilian factors have been a bit of a support here too, with the country’s strong exports last year raising concerns over whether there is enough left for domestic needs.

Mr Reilly flagged “expectations for a shortage in corn supply across selected parts of interior Brazil”.

And the drought in South Africa remains an issue too, prompting ideas of raised imports to the region, although yellow maize futures for March were down 1.1% at 3,850 rand a tonne in Johannesburg, and white maize for March down 1.5% at 5,136 rand a tonne.

US corn export sales last week are expected, in the official data later, to come in at 600,000-900,000 tonnes, compared with 669,231 tonnes a week before.

‘Priced out of global market’

Back in Chicago, wheat was flat, at $4.75 a bushel, undermined somewhat by the pressure from the export prices offered by competing origins to Egypt at a tender on Thursday.

US wheat is “priced out of the global market”, Mr Reilly said.

Egypt’s Gasc authority bought 235,000 tons of Romanian, French and Russian wheat, at an average price of $189.17 a tonne – and that excluded offers from Argentina, an absence which, as Benson Quinn Commodities said, was “likely rooted in ergot or other quality issues”.

Gasc has imposed a zero tolerance on ergot, at a time when Argentina’s wheat crop, while receiving three upgrades on quantity on Thursday, gained reminders over quality shortfalls too.

US wheat export sales data for last week are expected at 200,000-400,000 tonnes, compared with 274,673 tonnes the previous week.

Add New Comment

Forgot password? or Register

You are commenting as a guest.