Palm oil recovers, but soybeans stumble

(Agrimoney) – Palm oil futures managed an astonishing recovery.

In Kuala Lumpur, they revived from a five-year low of 1,954 ringgit a tonne to close at 2,027 ringgit a tonne, a gain of 1.6% on the day.

While data from cargo surveyors showed Malaysian exports of the vegetable oil struggling – with Intertek putting the decline so far in August at 15.3% month on month, and Societe Generale de Surveillance seeing the drop at 11.3% – data from rival shipper Indonesia showed that there is demand around.

Orders from India and African countries lifted Indonesian shipments to a seven-month high of 1.84m tonnes, Indonesian palm oil association Gapki said.

‘Frost damage’

Palm oil’s revival helped rival vegetable oil soyoil higher, with Chicago’s December lot closing up 1.1% at 33.96 cents a pound, having set a contract low of 32.45 cents a pound earlier.

And that gave some support to canola too, an oil-heavy oilseed, as opposed to soybeans which are relatively higher in meal, the feed ingredient gained from crushing the crop.

At Chicago broker Futures International, Terry Reilly noted that “there was some canola that froze in central Alberta during the weekend”, although the area affected is believed too small to make much of an impact on Canada’s overall production number.

Canola for November added 0.5% to Can$420.30 a tonne in Winnipeg.

Processors retreat

However, for soybeans themselves, the price move was opposite to that of palm oil, with early firmness, in the September contract, giving way to late weakness.

The September lot ended down 3.5% at $11.25 ¾ a bushel, falling back below its 50-day moving average and flagging the negative technical sign of trading outside the range of the previous session but finishing lower.

The pressure came from ideas that demand for tight old crop supplies was now drying up, as soybean processors awaited new crop supplies.

At Country Futures, Darrell Holaday said: “We said last week that there would come a point this week where the soybean basis would collapse as processors will quit pushing spot cash bid as soon as they determined their cash inventory was sufficient to get them to shut down or new crop supplies.

“We also indicated it would be nasty when this occurred.”

Weather outlook

Soymeal itself plunged 4.5% to $409.50 a short ton for the September contract.

And the performances impacted on later contracts too, with December soymeal tumbling 2.7% to $343.30 a short ton.

New crop November soybeans dropped 1.2% to $10.29 ¼ a bushel, well into areas not trod before by the contract.

The weather was little help, with weekend rains in the US Midwest “better than expected”, according to Richard Feltes at RJ O’Brien, who said that outlook was “negative” for prices.

The forecast includes “slightly warmer temperatures over the next week”, helping a crop which has been a bit short changed in terms of solar energy received, while the Midwest will also see “more rain filling in dry spots”.

Frost concerns

As an extra setback for values, it looks like there is “no sign of frost for next 30 days”, Mr Feltes said.

At Allendale, Paul Georgy said: “Traders will be watching for any chance of early frost,” which represents one of the last threats to ideas of huge US soybean and corn crops.

“There is nothing in the 15 day forecast suggesting a frost concern, however,” Mr Georgy added.

And, on the demand side, Futures International’s Terry Reilly noted that “there is growing concern some China commodity import companies are finding it harder to secure financing”, boding ill for purchases of raw materials such as soybeans.

China is the top importer of soybeans, as well as of cotton, rubber etc.

Tour results

Some of the negatives depressing soybean prices applied to corn too, although the grain had support from decent US export data.

The US shipped 1.09m tonnes of the grain last week, up from 971,305 tonnes the week before, and 308,342 tonnes in the same week of 2013, data from the US Department of Agriculture showed.

Furthermore, the USDA announced 120,000 tonnes of new-crop corn sold to Colombia, and 113,673 tonnes to Costa Rica, under its daily reporting system.

And there was, potentially, some support too from the results of the Pro Farmer crop tour, which came in with US soybean and corn production figures only just above those the USDA revealed this month which were broadly deemed underestimates.

The tour pegged the corn yield at 169.3 bushels per acre, and production only 70m bushels above the USDA figure, while for soybeans the figures were 45.35 bushels per acre and 4m bushels.

The data were at the “low end of what we were thinking”, said Futures International’s Terry Reilly.

Historical record

CHS Hedging said: “The tour’s numbers were in line with the USDA, which disappointed some bears.”

However, it is also the case that the tour has a history of conservation forecasts, estimating the US corn yield last year, for instance, at 154.1 bushels per acre, and production at 13.46bn bushels, compared with final USDA estimates of 158.8 bushels per acre and 13.925bn bushels.

“On the evidence of the last two years there’s the potential for final yields and production to ultimately come in significantly better still than even the record levels indicated by Pro Farmer on Friday night,” said Dave Norris, the UK-based grains blogger.

In fact, CHS said that “in six of the last eight years, the tour’s yield has been below the September USDA yield”.

December corn ended 1.3% lower at $3.66 ¾ a bushel, surrendering its 10-day and 20-day moving averages.

Russian export hopes

Still, that was better than wheat, down 1.4% at $5.54 ½ a bushel in Chicago for December delivery.

Export news was less strong, with the US shipping 558,113 tonnes last week, down from the 596,675 tonnes the week before.

Indeed, it is Russia which appears to be enjoying a notably strong share of world export business so far in 2014-15, with the country raising to 27m tonnes, from 25m tonnes, its forecast for overall grain shipments during the season, the majority of wheat will be wheat.

Benson Quinn Commodities also noted the reduction in hedge funds’ net short position in Chicago wheat futures and options, according to the latest CFTC data – a decline which creates scope for fresh short holdings.

“The reduction of short positions in Chicago wheat on last week’s [CFTC] report is a negative input,” the broker said.

‘Demand-led bull market’

Among soft commodities, raw sugar gave up early headway too to end down 1.8% at 15.36 cents a pound for October delivery, the lowest finish for a spot contract in nearly seven months.

While hedge funds extended their net short position in raw sugar futures and options again in the latest week, to 27,327 contracts, there remains scope for plenty more before touching the high of 88,140 lots reached in June last year.

The decline was seen as largely technically inspired, with lower prices failing to provoke patterns sufficient to inspire buying by investors, or indeed by end users.

But cocoa for December added 0.8% to $3,219 a tonne for December delivery, remaining close to three-year highs.

“The market remains a demand-led bull market,” said Jack Scoville at Price Futures.

“Demand remains a primary driver of the market and stronger demand is expected to continue well into next year.

“Any downside corrections in cocoa prices should be short term and… the overall trend to higher prices should continue.”