It is a big day for agricultural commodity data.
Besides bringing weekly US export sales data, as normal for a Thursday, investors will be presented by Conab with a monthly report on Brazilian crop supply and demand, and by the US Department of Agriculture with a Wasde briefing on world crop balance sheets.
The monthly Wasde, a highlight of the ag investor’s calendar, is being closely watched for its data on Brazil too, as elsewhere in South America, with harvests of the likes of soybeans in progress, and estimates for them getting ever bigger.
That has heightened expectations for the potential for South American competition to the US in exports, particularly at a time when the real has gone back into a retreat against a dollar which is gaining ground on ideas of US interest rate rises ahead.
(A stronger dollar undermines prices of dollar-denominated exports, such as many commodities, by making them less affordable to buyers in other currencies.)
The dollar was in fact quiet in early deals, trading flat at a little above 102 against a basket of currencies.
That helped allow some small recovery in Chicago futures in grains, in wheat in particular, which traded 0.1% higher to $4.47 ½ a bushel for May delivery, as of 09:30 UK time (03:30 Chicago time), managing to stay just ahead of their 40-day moving average.
Sentiment in the wheat market – for which the Wasde is viewed as less important than for the likes of corn and soybeans, given that 2016-17 harvests are over, and the real growing period for 2017-18 wheat has yet to come – was improved by further news of demand from a major end user.
Saudi Arabia’s main state wheat buying agency, the Saudi Grains Organization, issued an international tender to purchase 720,000 tonnes of hard wheat.
This follows a buying spree by Egypt late last month, and purchases so far this month by the likes of Japan, the Philippines and Turkey.
‘Cold temperatures returning’
Furthermore, while there is some idea that weather forecasts have changed for the better as far as dryness-tested winter wheat crops (for the 2017 harvest) in the US Plains go, raising the chances of rain, not all commentators see it that way.
“Some traders noted improving weather for the US but we didn’t see any major changes in the forecast” on Wednesday, said Terry Reilly at Futures International.
“The current forecast during the second week of the outlook shows cold temperatures returning to the Great Plains, increasing the probability for damage to occur.”
Tobin Gorey at Commonwealth Bank of Australia said that the forecasts, while wetter overall, “are not placing much rain in the hard red winter wheat areas”.
Corn vs wheat
The recovery in wheat futures help prop up corn too, which added 0.1% to $3.73 ¾ a bushel for May delivery, despite the prospect of Brazilian crop upgrades later.
In fact, the spread between corn and wheat prices is being closely watched by traders given the high supplies of wheat around, especially of the lower quality stuff best suited to livestock feeding, and requiring competitive pricing, compared with corn, to win such demand.
Wheat’s premium (May basis) over corn in Chicago has eased back a bit after recovering from $0.47 ¾ a bushel in December to a high of $0.90 a bushel three weeks ago.
Corn’s recent outperformance meanwhile has helped keep it, just, above its 50-day moving average at $3.72 a bushel, trade below which would be seen as a negative price signal.
“May corn has had a series of lower highs and lower lows and is now challenging the 50- and 200-day moving averages,” said Benson Quinn Commodities.
“Look for additional fund selling on trade below this level.” @
‘Lower in a hurry’
Soybean futures too are in hot territory in chart analysis terms.
“The May soybean market is trading right at levels that would turn the soybean charts lower in a hurry,” as of the last session’s close, Benson Quinn Commodities said.
“Another trade below the 200-day moving average at $10.20 a bushel and trade below the late-February low of $10.17 should trigger additional selling.”
Such selling in turn “would put the $9.90-10.00-a-bushel price levels back on the table in the May contract.”
In fact, the May soybean contract lost further ground in early deals on Wednesday, dropping 0.4% to trade at $10.18 a bushel, so looking indeed at risk of having damaged its chart appeal.
Whether the hurt sticks may depend on the results of the Wasde, as well as the export sales data expected to come in at 350,000-550,000 tonnes for the oilseed for 2016-17, plus up to 100,000 tonnes for next season.
Last week, the figures were 427,739 tonnes and zero tonnes respectively.
(For corn, the data are expected at 700,000-1.0m tonnes old crop, and up to 100,000 tonnes for 2017-18, compared with data last time of 692,404 tonnes and 20,650 tonnes respectively.
And for wheat, sales are expected at 300,000-500,000 tonnes for 2016-17, and 50,000-200,000 for next season. Last time, the data were 353,170 tonnes and 98,800 tonnes respectively.)
Among the soy products, soyoil was the weaker, shedding 0.4% to 33.41 cents a pound for May delivery, continuing to lose ground gained last week on rumours, since denied, of reforms by US President Donald Trump which were seen as likely to boost demand for domestic biodiesel, as made from vegetable oils.
Palm oil too lost ground, by 1.0% to 2,847 ringgit a tonne in Kuala Lumpur, despite a decent performance overnight by futures on the Dalian exchange in China, a major importing country, where the May lot added 0.8% to 5,858 yuan a tonne.
And in Winnipeg, canola – an oil-heavy rather than meal-heavy oilseed – eased back too, by Can$0.10 to Can$527.10 a tonne, giving back some ground gained in a trend-bucking, firm performance in the last session, on strong Canadian export data.
“Strong demand from China has seen canola exports recover rapidly post trade dispute,” CBA’s Tobin Gorey said.
“After falling to just 80,000 tonnes in September last year, exports in January hit a record high of 741,000 tonnes.”
Indian, Chinese dynamics
In New York, cotton joined its fellow row crops in negative territory, shedding 0.3% to 77.87 cents a pound.
Traders at Ecom flagged concerns over Indian supplies, noting that “Indian cotton arrivals are now just over 20m bales, which is a long way from the crop estimates of around 34m bales”.
However, much attention is being focused on the results of the auctions of supplies from Chinese state inventories, which after a bright start have shown a less promising trend, with prices paid falling, and sales on Wednesday falling 100,000 tonnes short of the sell-out to which investors have become accustomed.
While results of Thursday’s auctions are not yet available to Agrimoney.com, the signal was not promising from futures on China’s Zhengzhou exchange, where the May cotton contract settled 1.7% lower at 15,665 yuan a tonne.
(Source – http://www.agrimoney.com/marketreport/am-markets-soy-dips-below-chart-trigger-ahead-of-key-data–4006.html)