Turkey is in the news for ag investors, as is fitting for the US Thanksgiving holiday.
As US holidaymakers tuck into their seasonal turkey feast, spare a thought for farmers in the nation of that name, suffering (another) drought.
After sustaining a drought-hit harvest two years ago, when wheat output tumbled some 20%, necessitating a jump in imports, Turkey is seeing a lack of rainfall again.
Over the last month, “rains have been minimal, and drought conditions have begun to develop across much of the [wheat-growing] area,” Commodity Weather Group said.
“This is inhibiting late fall growth and leaving some areas more vulnerable to winterkill.”
The weather “raises concern for wheat”, the weather group said, although adding that forward models suggest that the dry pattern “may finally break at the beginning of December”.
Contrasting wheat price fortunes
Whether such worries have any impact on supporting European wheat futures, we will have to wait until later (although in fact the Black Sea is, not surprisingly, Turkey’s default origin for wheat imports).
Paris wheat futures are already standing near four-month highs, boosted by the need to choke off Europe’s exports following a dismal harvest in France, the European Union’s top wheat grower, and shipper.
London’s sterling-denominated wheat futures remain close to two-year highs, given an extra fillip by the depreciation in sterling since the Brexit vote.
One result already in from the wheat markets for Thursday is a close down 0.9%, at Aus$228.00 a tonne, for Australian wheat futures for January, not far from a contract low.
While the Australian dollar has depreciated against the resurgent dollar, boosting the competitiveness of Aussie exports, the pressure on prices looks a sign of decent harvest hopes being realised as combines continue to roll.
Rural Bank and Rural Finance this week pegged the Australian wheat crop at a strong 28m tonnes, but there remain those seeing a higher harvest still, of potentially above 30m tonnes.
More bullish sentiment was evident in Shanghai, where rubber futures for January soared a further 2.9% to 18,040 yuan a tonne, a contract closing high.
The headway took gains for this week above 11%, dwarfing losses earlier in the month on concerns over a Chinese clampdown on commodity speculators.
The latest gains were spurred by data showing a further decline in crude rubber inventories at ports in the key Japanese market – of 10.7% to 6,219 tonnes in the first 10 days of November.
That took the rate of decline since October 10 to 18.2%.
Rubber futures in Tokyo itself for April soared 4.1% to 238.80 yen a kilogramme, the highest for a benchmark contract in 17 months, after a rest on Wednesday for a Japanese public holiday.
The contract is up 14.0% for the week.
A late-November revival in crude prices has also helped the rubber market, in boosting the value of synthetic alternatives, although Brent crude eased 0.2% to 48.85 a barrel as of 08:45 UK time (02:45 Chicago time).
More expensive oil has also added support for prices of palm oil, which is, like other vegetable oils such as soyoil, largely used in making biodiesel.
But more important in Thursday’s 1.3% gain to 1,993 ringgit a tonne in Kuala Lumpur for February was the moves by the US Environmental Protection Agency to raise its US biodiesel target for 2017, by 280m gallons from a May forecast to 4.28bn gallons.
On Thursday, Chicago soyoil for December soared 6.9% to 36.85 cents a pound on the news, the highest for a spot contract since July 2014, with the better-traded January lot adding 6.5%.
‘Caught off guard’
“That larger-than-expected lift [to the EPA target] fuelled ideas that already tight vegetable oil supply would become even tighter in 2017,” said Tobin Gorey at Commonwealth Bank of Australia.
At Chicago broker Futures International, Terry Reilly said that the soyoil rally “was directly related to market reaction after the EPA set 2017 mandates at a record for biofuels.
“The EPA was a surprise, especially as it was released a day before a major US holiday. It caught traders off guard.”
Kuala Lumpur palm oil earlier touched 3,098 ringgit a tonne, the highest for a spot contract in four years.
Palm oil for January also gained 1.4% to 6,310 yuan a tonne on China’s Dalian exchange, having earlier touched a contract high of 6,496 yuan a tonne.
In fact, rival soyoil fared better on the Dalian, in rising by 2.9% to 7,026 ringgit a tonne for the best-traded May contract.
But soybeans themselves for January could only nudge 0.1% higher to 3,847 yuan a tonne.
(Source – http://www.agrimoney.com/marketreport/am-markets-us-biofuel-boost-sends-palm-oil-to-4-year-high–3861.html)