So just what will Argentina’s new president mean for grain markets?
Friday will be Mauricio Macri’s first full working day in the office. Already, there is talk of his administration seeking $5bn-10bn from Wall Street banks to bolster Argentina’s foreign currency reserves.
“Given the financial emergency, we expect the government to obtain about $10bn in financing in the first quarter to build reserves,” Sebastian Rondeau, an economist at Bank of America, said.
Still, what is really taking focus among ag investors is what his administration will mean for the peso, which Mr Macri is to liberalise next week, with a weaker peso boosting the competitiveness of Argentine exports such as corn, soybeans and wheat.
(While he had an important agenda for cutting crop export taxes and restrictions too, that seems pretty clear.)
How far will it drop?
“The market is worried around how far the peso will fall once currency controls are lifted on December 14,” said Tobin Gorey at Commonwealth Bank of Australia.
The omens aren’t good if it falls to the level that the currency is trading in in the black market – ie about half the official level of 9.7 pesos to $1.
However, such a decline “would likely be ‘worst case scenario’,” Mr Gorey sid.
“Argentina’s president elect is of the view that the peso will settle a level that is roughly the average of the two markets.
“That might be ‘best case scenario’, but there’s some merit to the argument. ”
Whatever, the Argentine uncertainty “continues to anchor soybean prices”, he added.
Benson Quinn Commodities said: “The possibility of Argentina devaluing its currency is real and is likely offering some resistance. The trade wants to be positioned for the next move from Argentina.”
And that is creating something of a vicious circle for Chicago prices, in that with futures struggling to find positive movement whatever other bullish news may occur.
“The technical structure of the soybean market is negative, partly because the market can’t close well enough to raise any concerns with the short crowd,” Benson Quinn Commodities said.
Hedge funds were net short of some 35,000 lots of Chicago soybean futures and options as of latest data (which will be updated later).
And there is some bullish news around.
CHS Hedging noted that US export sales data on Thursday for soybeans “came in at 1.45m tonnes, nicely above expectations of 700,000-1.1m tonnes”.
Then there is the dryness in Brazil, which has prompted Oil World, the respected analysis group, to warn that a 95m-tonne crop could be in the offing, well below forecasts of 100m tonnes and above from most other commentators.
‘A little fluffy’
The oilseeds complex as a whole also got support on Friday frompalm oil which gained 1.7% to 2,418 ringgit a tonne in Kuala Lumpur as of 08:45 UK time (02:45 Chicago time), amid worries over monsoon rains disrupting production, rather than the El Nino-related dryness which has dominated the market of late.
That helped rival vegetable oil soyoil for January gain 0.1% to 31.79 cents a pound in Chicago, despite concerns of profit-taking pressure waiting in the wings after its recent rally.
“Soy oil still looks a little fluffy up here,” Benson Quinn said, cautioning that funds appear “too long soyoil and I don’t expect them to get the news they need in time to save their long position”.
Soybeans themselves for January gained 0.5% to $8.83 a bushel.
That was actually better than grains could manage, with wheatcontinuing to find pressure from ideas of ample world supply.
“To add to the weight of the already fundamentally bearish wheat market,” US export sales data n Thursday “were disappointing at just 225,000 tonnes, below expectations of 300,000-.500,000 tonnes,” CHS Hedging said, terming this the “third lowest of the marketing year”.
While a big order by Algeria (probably largely from France, but also some from Argentina) did speak of some end-user demand, the price of $195-197 a tonne including freight was not so promising, for milling wheat.
The price “strikes me as very negative”, Benson Quinn said.
While there is some upward pressure on futures from the covering by hedge funds of a substantial net short position, Chicago soft red winter wheat for March stood 0.3% lower at $4.94 ¼ a bushel.
Nor was it a help that corn eased, after a jump in the last session on some strong US export sales data, of 1.10m tonnes, ahead of market expectations of at best 650,000 tonnes, and the second largest figure of the marketing year.
Still, as with soybeans and wheat, there are worries about the growing threat that Argentina poses to US corn exports.
Corn for March stood 0.2% lower at $3.78 ½ a bushel.
(Source – http://www.agrimoney.com/marketreport/am-markets-soy-prices-gain-even-as-argentine-reforms-loom–3419.html)