As the world’s biggest economy, the US, takes a holiday, the second largest, China, returns from one.
And with mixed effect, as far as agricultural commodity investors are concerned.
On the plus side, the country’s Shanghai share market returned after a week-long break for lunar near year – a period of steep losses in stockmarkets that remained open – with only a modest decline, of 0.6% in its headline index.
Tokyo shares, meanwhile, soared 7.2%, helping London stocks add 1.7% in early deals, as measured by the FTSE 100 index.
The share market performance was underpinned by comments over the weekend from Zhou Xiaochuan, the People’s Bank of China governor, in which he said that he saw no basis for continued depreciation in the renminbi.
That should be good news for commodities too, in that China is the biggest buyer of many, such as soybeans, sugar and rubber, and reduced fears of renminbi depreciation would imply that these should remain more affordable for the country’s importers.
Certainly, rubber futures for May settled up 0.9% at 10,330 renminbi per tonne in Shanghai, also gaining support from Friday’s surge in prices of oil, the source of competing synthetic rubber.
And in Tokyo, rubber futures stood 0.7% higher at 154.70 yen a kilogramme in the afternoon session.
Prices of rubber, as an industrial commodity, also tend to move more in line with broader economic sentiment and share values than do some other ags.
The same often applies to cotton too.
However, it fell by 1.8% to 10.420 renminbi per tonne on the Zhengzhou, for September delivery, catching up with some losses last week in New York prices, which were hurt by bearish revisions in the US Department of Agriculture’s benchmark Wasde report.
(The briefing raised the estimate for US and world cotton inventories, and reduced Chinese import expectations.)
New York cotton futures “stair-stepped to new contract lows” last week, said Dr John Robinson, cotton marketing expert at Texas A&M University, adding that “this continues a 5-6 cents a pound slide since early December”.
Dr Robinson also flagged talk “of Chinese reserve stocks entering circulation, perhaps even as exports”, ie of China selling some of its huge stocks of the fibre.
As an extra negative, Tobin Gorey at Commonwealth Bank of Australia noted that “Brazil’s cotton harvest is proceeding in favourable conditions.
“Meteorologists expect enough breaks between forecast rounds of rain to allow fieldwork to continue relatively unimpeded.”
An extra input for ag markets from China came in the form of initial export data for January, which showed soybean buy-ins at 5.66m tonnes – down 38% month on month, and by 17.7% year on year.
It was a figure termed by Australia & New Zealand Bank as “weak, despite prices continuing to fall to the cheapest level since 2007 for Chinese buyers”.
However, “Chinese buyers were likely to have been in little rush leading into the Chinese new year, with plentiful supplies in front of them from both Brazil and the US”.
And, returning to Brazilian harvesting, ANZ noted that the phase was “progressing rapidly” for soybeans too, “with new supplies plentiful as Brazilian farmers sell to take advantage of high domestic prices in local currency terms”.
Soybean futures for May eased by 0.6% to 3,451 renminbi per tonne on China’s Dalian exchange, in their first session for a week.
Greater movement was actually seen elsewhere in the oilseeds sector, with palm oil, which soared 3.7% to 4,988 renminbi per tonne on the Dalian, catching up with some of the gains last week in Kuala Lumpur.
In fact, Kuala Lumpur futures on Monday retreated by 1.3% to 2,604 ringgit a tonne as of 09:30 UK time (03:30 Chicago time), albeit after hitting 2,648 ringgit a tonne earlier, their highest for nearly two years.
Data from cargo surveyors showed a marked deterioration in Malaysian palm exports so far this month, with ITS putting the month-on-month drop at 16.1%, and SGS at 14.2%.
‘Rainfall did not materialise’
On grain markets, white maize futures for May edged 1.1% higher to 4,863 rand a tonne in Johannesburg, remaining close to last month’s contract high of 5,065 rand a tonne.
While weather appears to have improved a bit in South Africa, in terms of rains refreshing drought-hit areas, it is still far from ideal.
“Last week’s forecasted rainfall across many parts of the country did not materialise,” industry group Grain SA noted, if adding that more moisture was in the forecast.
‘Fears about the confusion’
In Paris, wheat for May was indicated up 0.5% at E155.75 a tonne, against a backdrop of a falling euro, down 0.5% against the dollar.
A rise in wheat would come despite fresh disarray in Egypt over import, with the country’s Gasc authority at the weekend cancelling its latest tender, citing high prices, which traders say they have raised to account for the risk of cargos being rejected on grounds of ergot contamination.
This represented the third cancelled tender in less than two weeks, with Gasc buying just one cargo on Friday, at a further tender.
Agritel noted that “international operators are showing fears about the confusion on qualitative demands from Egyptian authorities,” thanks to the ergot saga, which has seen a French cargo, from Bunge, rejected.
US markets are closed on Monday for the President’s Day holiday.
(Source – http://www.agrimoney.com/marketreport/am-markets-china-returns-with-mixed-blessings-for-ags—-3500.html)