The Chinese equity slump resumed on Tuesday, sparking further fears on the future of the Chinese economy, and Chinese commodity demand.
The Shanghai Composite index finished down 6.1%, its largest percentage decline since late July.
Although Chinese equities are still nearly 70% up from the same time last year, the fresh falls have cast doubt on the government’s ability to control the slump, after a series of heavy handed interventions.
Following last week’s sharp devaluation to the Chinese currency, this represents a further threat to demand from the world’s biggest commodity importer.
Oilseeds were hit by threat of Chinese economic weakness.
November canola in Winnipeg fell 2.2% to CAN$475 a tonne, a 2-and-a-half month low.
And Darrell Holladay of Country Futures saw “weakness in the soybeans primarily tied to additional weakness in the Chinese economy.”
The latest weekly US Department of Agriculture crop report leant no support, with soybean ratings left unchanged at 63% good or excellent, compared to 71% last year, and a 10-year average of 58%.
Weather was also supply bearish, as further heavy rains hit the US Midwest, helping to dispel lingering dryness fears.
Forecaster Gail Martell said “this morning’s satellite image shows clusters of strong thunderstorms in Iowa, South Dakota, Nebraska and Kansas, adding that “more rain is predicted Friday-Sunday, ending a brief dry spell”.
But she warned “field moisture may change from ample to excessively wet, if the weekend rainfall becomes very heavy.
November soybeans closed down 1.5% at $9.04 ј a bushel, the lowest the contract has reached since the start of June.
Corn showed more resilience, after US crop ratings were dropped 1% to 69% good or excellent, compared to 72% a year ago and a10-year average of 59%.
Mr Holladay noted that corn markets were “still seeing some buying tied to ideas the US corn yield will significantly lower than USDA numbers from last week”.
September corn closed up 0.7% at $3.66 ј a bushel.
However Brazilian corn exports remain ample.
“The nearly 23% drop in the value of the Brazilian real has helped make them the cheapest source of corn to the world today,” said Joe Barker of CHS Hedging.
“There are currently 82 ships in the line-up waiting to load 4.53m tonnes of corn out of Brazilian ports,” he said.
“Last year at this time there were only 40 ships waiting to load 2.16m tonnes of corn out Brazil.”
French wheat slid further on continued fears of its inability to compete with Baltic and Black sea product, as hopes for the French harvest rise.
December Matiff wheat closed down 0.7% at E178.59 a tonne.
September Chicago wheat closed down 1.1% at $4.84 ј a bushel.
Raw sugar prices firmed on fears over dryness in India’s south west.
The Australian Bureau of Meteorology warned that the El Nino signal was strengthening on Tuesday.
El Nino is associated with dry weather in the eastern Pacific, including key sugar produces such as Thailand, India, and Australia.
“The market is trying to force a low and bullish traders are using El Nino concerns and ideas of less production than demand for the coming crop year as reasons to buy,” said Jack Scoville of Price Futures.
He noted that “El Nino could really hurt production in all countries in the region if hot and dry weather develops”.
October raw sugar in New York settled up 0.9%, at 10.73 cents a pound.
West African dryness
New York cocoa firmed on short covering, amid concerns about dry weather in the Ivory Coast and Ghana, the world’s largest and second largest growers respectively.
El Nino can cause dry weather in West Africa.
Concerns over dryness in parts of top grower Ivory Coast and No. 2 producer Ghana also provided bullish sentiment, traders said.
New York December cocoa settled up 0.9%, at $3,084 a tonne, while London December cocoa settled up 0.5%, at £2,052 a tonne.
(Source – http://www.agrimoney.com/marketreport/pm-markets-oilseed-futures-fall-on-fresh-china-fears–3263.html)