US interest rates will remain unchanged this month, said chairman of the Federal Reserve Janet Yellen at a press conference on Thursday.
Markets had been eying the prospect of a rates rise, which would have supported the dollar, and pressured dollar denominated commodity prices.
The Federal Reserve’s forward guidance was dovish, as Ms Yellen said that it would be looking for “some further improvement in the labour markets” before rates went up.
But expectations remain that a rate rise is on the cards before the end of the year.
Ms Yellen also warned that “recent global economic and financial developments may restrain economic activity somewhat,” a clear reference to the economic turmoil in the Chinese stock markets, suggesting that Fed-watchers will now have to keep one eye on China.
“This decision brings with it greater uncertainty and I believe greater volatility going forward,” said Mike Zuzolo at Global Commodity Analytics.
“Some are now questioning whether Fed policy is now attached to China – this becomes problematic because it introduces the prospects of the Fed being tied down from ‘lift-off’ based on China’s Central Bank policy,” he said.
“This is my major reason for increased volatility, and it being Asian-led volatility in all likelihood.”
It might be going too far to call the announcement a damp squib, given that betting was already against a rate rise, but the news had very little effect on commodity prices.
The dollar took on a slightly weaker tone, down about 0.8% toward the close of the Chicago session.
But grains closed the day down, weighed on by harvest pressure and some disappointing US exports.
In the week to last Wednesday, US soybean exports sales came in at 912m tonnes, at the lower end of expectations.
Trade had been expecting sales of 900-1,300m tonnes.
The pace of sales for this season’s soybean crop has disappointed markets this year, suggesting low global demand.
“Total commitments are starting off the year very slow compared to the last five years,” noted Joe Lardy of CHS.
At least Chinese demand seems to be holding up.
460,000 tonnes of Chinese soybean buying was reported in the week to last Wednesday, with another 184m tonnes this Wednesday, and 298m tonnes on Thursday.
But there are concerns on the long-term prospects for Chinese demand.
A senior trader with grain giant Cargill told Reuters that a slowdown in animal feed demand could see Chinese soy imports falling for the first time in a decade in 2015-16.
November soybeans closed down 0.3% at $8.84 ¼ a bushel.
On Thursday Statistics Canada raised its 2015 canola forecast by 1.1m tonnes to 14.4m tonnes.
November canola in Winnipeg closed down 0.5% at C$470.8 a tonne.
US wheat export sales were 378m tonnes, in the middle of expectations, which were at 250-450m tonnes, but wheat prices fell under pressure from ample global supplies.
Statistics Canada raised its hard red wheat forecast by 0.4m tonnes to 18.4m tonnes.
And harvesting is ready to pick up as weather improves.
Spring wheat harvesting in the Canadian Prairies has been slowed by rain across key growing regions.
But Don Keeney at MDA Weather Services said that rains would ease this week.
“The down turn in rains across the region will allow wetness to ease a bit, and canola and spring wheat to harvesting to finally improve again,” Mr Keeney said.
December Minneapolis spring wheat closed down 1.2% at $5.09 ¼ a bushel.
And consultancy Strategie Grains lifted its EU wheat crop estimate by 3.6m tonnes to 155.2m tonnes. This would leave EU wheat production just 1.5m tonnes behind last year’s record high.
Strategies Grains lifted its forecast for soft wheat exports by 0.2m tonnes to 27.0m tonnes.
This forecast still lags last year’s 32.5m tonnes exports, underlying the ample supplies of global wheat.
Meanwhile hopes are growing that the Australian harvest may exceed 27m tonnes, putting it within a whisker of being the second largest on record.
December wheat in Paris closed down 0.9% at E166.75 a tonne.
Chicago December wheat closed down 1.1% at $4.81 ½ a bushel.
US corn export sales were at 533m tonnes, were markets had expected 400-600m tonnes.
And Stratagie Grains cut its EU corn forecast again on Thursday, down 2.3m tonnes to 57.4m tonnes, compared to 75.7mn tonnes.
EU wheat production was hit by hot weather earlier in the summer, which stressed plants during their development.
But harvest pressure in the US bore down on Chicago prices, as December corn closed down 1.4% at $3.79 ¾ a bushel.
Cotton prices fell despite decent export sales.
US export sales for 2015-16 crop reached 96,600 running bales in the week to last Wednesday, up 16% from the previous week and up 46% from the prior four-week average.
But China was notably absent from buying, and total commitments are lagging far behind last year.
Chinese cotton imports hit a 10-year low in August, and concerns are mounting about the future of Chinese demand, particularly as synthetic fibre remains notable cheaper than cotton in China.
December cotton settled down 0.5%, at 62.40 cents a pound.
October raw sugar settled down 0.3%, at 11.44 cents a pound, pressured by fresh weakness in the real, which came within a whisker of touching last week’s 2-1/2 week low.
The wheels continue to churn in the Brazilian government over the implantation of anew gasoline tax.
If implemented, this would encourage ethanol consumption, and divert cane away from sugar production.
But despite ongoing ministerial meetings, the issue has yet to be resolved.
“Naturally, the sugar and ethanol sector is in favour of an increase in the CIDE rate as discussed, but it seems they will have to wait some time for it, meaning that the issue will be bubbling away behind the scenes for sugar traders,” said Nick Penney, senior trader at Sucden Financial.
December arabica coffee settled up 0.4%, at 118.55 a pound.
November robusta coffee finished down 1.1%, at $1,564 a tonne.
(Source – http://www.agrimoney.com/marketreport/pm-markets-no-us-rate-hike-but-grain-prices-fall–3300.html)