(AgriMoney) – The absence of US markets for the Martin Luther King holiday cast a soft tone over most markets Monday with lighter volumes reflecting the mood.
The German DAX share index stood down 0.3% near the close while the French CAC was off a slightly a smaller 0.3%. The UK FTSE 100 bucked the trend to eke out a small 0.1% gain.
The broadly weak tone in equities reflected the negative finish to Asian markets after a run of economic data from China proved slightly softer-than-forecast as industrial production and fixed asset investment missed forecasts.
In addition the data showed China’s economy grew by 7.7% in the final quarter of 2013, slightly above forecast, but again reflecting China’s plans to move away from state led growth as well as rein in the nation’s debt levels.
The euro stood up 0.2% against the US dollar in late trade.
Elsewhere in the commodity complex gold was up 0.2% at $1,256 an ounce, reflecting the dollar, signs of slowing liquidation from institutional investors as well as strike threats by South African miner workers.
Brent crude stood down 0.3%, having slipped in reaction to the Chinese economic data.
Sugar “come up black”
After sugar futures reached fresh multi-year lows Friday prices for the sweetener saw a modest short covering rise at the start of this week.
“The sugar roulette wheel has finally ‘come up black’ and broken the run of ‘red’ which has had been almost unprecedented,” said Tom Kujawa, co-head of softs at Sucden Financial.
Despite today’s gains, sentiment over the general outlook for sugar remains negative over the medium-term.
Price hopes have been undermined by strong late-season production in Brazil and ideas of decent supplies in Thailand, the second-ranked exporter, and India.
Indeed analysts at Australia & New Zealand Bank suggest the recent bearish sentiment would “typify” the outlook for 2014 with gains above 17 cents a pound to be “hard fought” amid further supply gains, notably in Brazil.
At Sucden, Mr Kujawa said: “There is little it seems out there in the ether other than the generally low prices, large fund net short positions and holiday season which is contributing to the bounce.”
The latest figures from the Commodity Futures Trading Commission showed hedge funds extended their net short holdings in sugar in the week to January 14, by more than 16,000 contracts to 52,306 lots, the biggest such position in nearly six months.
White sugar futures for March delivery stood up 0.4% in late London trade at $413.80 a tonne.
Cocoa tracks
The steadier tone in sugar prompted similar gains in the other soft commodities.
Cocoa future stood up 0.8% in London at £1,744 a tonne.
“Short-term, we expect further consolidation around £1,770-1,780 a tonne area,” suggested Myrto Sokou, senior research analyst at Sucden Financial.
Mr Sokou noted: “Further gains could focus on the £1,788 level, while modest resistance holds near 1800 area,” while adding a breach of the technically important 40-day moving average “opens potential for further losses toward £1,700 area, which acts as modest support.”
Cocoa prices have taken a more positive tone since their initial dip in early January, with prices supported by strong grind results from the EU and hot, dry weather conditions around the Ivory Coast growing regions.
“The overall fundamental picture should support generally strong prices as the supply situation should be tight on strong demand for the longer term,” suggested Jack Scoville, vice president at the Price Futures Group.
Coffee price followed the positive trend, with London robusta futures closing up 0.6% at £1,720 a tonne for March delivery.
Increased competition
Expectations of higher supplies kept wheat prices on a back footing Monday with European wheat futures extending to their lowest in over three months.
Kernel Holding earlier revealed a 22.5% increase in grain sales over the October-December quarter, to a record 1.3m tonnes. The surge reflects Ukraine’s record high harvest and stronger exports from Russia.
March milling wheat futures stood down 0.8% in Paris at E191.00 a tonne near the European close.
London feed wheat futures were down a larger 1% at £152.50 a tonne.
While the recent price correction has piqued fresh demand from buyers, however the recent purchase of US wheat by Egypt has surprised many, sparking speculation of increased competition.
“We now have a situation where all the various regions of supply are about in balance when delivering into North Africa which means that the competition is even greater”, noted a major European commodity house.
Last week’s price weakness, as futures fall to a three-year low for a spot contract of $5.60 ½ a bushel, prompted speculators to curb their bearish bets.
The net short position amongst managed money player in Chicago wheat fell more than 16,000 contracts to stand at -56,482 lots.
China soy gains
Aside from wheat activity in the grain sector was limited with the absence of US markets.
Prices in the soy sector saw modest gains overnight, adding to those seen last week amid strong Chinese demand expectations.
Soybean futures for May delivery posted a 1.1% on the Chinese Dalian exchange overnight, closing at 4,733 yuan a tonne.
Similar gains were recorded in the exchanges Soybean meal and soybean oil futures.
Reflecting the bullish outlook hedge funds extended their net long holdings of Chicago soybean futures last week, adding 18,713 contracts to a total 126,371 lots.
