For a while, it looked like decent US export data might secure a bit of a lift in Chicago prices.
But that was before dollar strength showed its hand, and sowed doubts as to the sustainability of demand for US crops – at least, without price falls.
The dollar soared 1.0% against a basket of currencies, lifted largely by a European Central Bank statement that, while it is to cut its bond purchases in half to E30bn a month from January, the economic stimulus programme will be extended until at least September 2018.
The euro dropped 1.2% to less than $1.17 per E1, boosting the competitiveness of eurozone exports.
And Paris wheat, for instance, added 0.5% to E162.50 a tonne for December, while rapeseed for February added 0.5% to E373.50 a tonne, coming less than E1.20 from crossing back above its 200-day moving average.
Strong export data
But there was more than euro weakness to the dollar’s rise, with the greenback’s appeal also boosted by growing confidence in a US tax reform package, and by technical factors, with the dollar jumping above its 100-day moving average against the currency basket.
It looks like closing above this line for the first time in seven months.
Whatever, a stronger dollar cuts the competitiveness of dollar-denominated exports, including many agricultural commodities, and raised a cloud, for instance, over the repeatability of decent US export sales data for soybeans last week, at 2.13m tonnes, well ahead of market expectations of at best 1.60m tonnes.
While the data initially provoked price firmness, it could not last, with November soybeans ending 0.4% lower at $9.71 ¼ a bushel.
Signally that left the contract back below its 200-day moving average.
‘Tied to China’s hip’
And other factors were cited too in the price decline, with another drop overnight, and contract low, in soybean prices on the Dalian, in China, the top importer of the oilseed.
“Dalian soybeans continue to trade lower, and until they bottom it is difficult to believe soybeans can trade markedly higher,” said Tregg Cronin at Halo Commodity Company.
“We are tied to China’s hip, plain and simple.”
‘Widespread rains in Brazil’
Furthermore, expectations to be broadly upbeat over rains to boost Brazilian soybean plantings.
“Heavy rains are expected across south central Brazil over the next several days,” said Kyle Tapley at MDA, adding that “models are in good agreement, showing widespread rains in the 6-15 day period across Brazil”.
Heaviest amounts will be seen in Mato Grosso, Mato Grosso do Sul, Goias, and Minas Gerais.
“The rains over the next 15 days will lead to significant improvements in soil moisture across northern and central Brazil and will favour germination and early growth of the first crop corn and soybean crops.”
Indeed, corn closed lower in Chicago too, by 0.1% at $3.51 a bushel, eventually giving back gains spurred by decent export sales data, at 1.29m tonnes, a little above the range of market forecasts, and a touch higher week on week too.
“Corn sales were supportive [for prices], coming in just above expectations,” said Benson Quinn Commodities.
Furthermore, there has been some support from the bioethanol complex, helped by the Environmental Protection Agency’s retreat from measures to weaken the US biofuels mandate.
“Corn ethanol RINs,” that is paper credits for use against blending requirements, “have continued to rally and were indicated as high as $0.99 a gallon,” said CHS Hedging.
“The highest level traded this year and nearing three-year highs at $1.20 set in November 2016.”
‘Dismal export sales’
Wheat in fact fared the worst of Chicago’s big three, dropping 0.9% to $4.31 ¾ a bushel for December delivery.
But then, a US export figure last of 360,600 tonnes, while within the range of market expectations, was not, when looked at more closely, so impressive for the main, traded types.
“Wheat sales on the surface were neutral,” said Benson Quinn Commodities.
“But by-class sales for the three major classes – hard red winter, soft red winter and hard red spring were dismal – with white wheat dominating.
White wheat accounted for 124.5m tonnes, punching well above its weight in the US harvest although some might say that spring wheat sales of 146.7m tonnes are respectable.
Still, “with hard red winter wheat and soft red winter wheat futures making new contract lows last week”, the data on these two classes definitely “disappointed”, the broker said.
Sugar vs coffee
Among soft commodities, a combination of a weaker real, which shed 1.4% against the greenback cutting the value of Brazilian assets, and the prospect of rains for the South American country boded ill for the likes of coffee and sugar, of which it is the top exporter.
And, indeed, raw sugar for March eased, although by a modest 0.5% at 14.11 cents a pound, giving back a little more of Tuesday’s gains on weak Brazilian Centre South production data.
However, arabica coffee futures for December added 0.7% to 124.10 cents a pound, helped by ideas raised by Marex Spectron on Wednesday that Brazilian farmers, for now, have the whip hand, in terms of having the ability to keep up a slow pace of sales, and starve out funds, which have a large net short position.
(Source – https://www.agrimoney.com/news/pm-markets-dollar-gains-spoil-optimism-at-decent-us-corn-soy-export-data-41624)