Just as agricultural commodities missed out on the rally in other raw materials, so they are being spared by the retreat in the rest of the complex too.
Rubber, as an industrial material, did get caught up in early-Wednesday commodities selling, which has been blamed on weak Chinese data, tumbling 4.3% to 193.30 yen a kilogramme in Tokyo for April delivery,
Official figures this week for growth in fixed-asset investment, retail growth and industrial production in China, a huge commodities importer and consumer, all came in below expectations, and seen as a reflection of government crackdowns on debt risks and factory pollution.
In China itself, Shanghai rubber for January also plunged 4.3%, to 13,550 yuan a tonne.
And some other Chinese contracts were notably weak too, including soybeans, which for January dropped 0.8% to 3,616 yuan a tonne on the Dalian, a fresh contract closing low (although well above an intraday bottom of 3,570 yuan a tonne.
China’s CNGOIC think tank has warned that the country’s November soybean imports could fall below 9m tonnes on shipment delays spurred by enhanced checks for genetically modified crop not allowed into the county, and by large port stocks, pegged at 5.77m tonnes last week.
Palm oil, of which China is also a large importer, dropped 0.9% to 5,506 yuan a tonne for January, the contract’s weakest close in two months.
But in Chicago, ag futures fared well compared with, for example, commodity majors such as Brent crude, which dropped back below $62 a barrel.
That said with the likes of corn and wheat already trading near to contract lows, further declines might be expected to be measured.
Chicago corn futures for December in fact added 0.2% to $3.38 a bushel as of 09:45 UK time (03:45 Chicago time), albeit only after setting a fresh contract low earlier of $3.37 a bushel, and with the gains potentially just down to profit-taking by holders of short positions.
‘Take it to the bank’
Short positions by funds look hefty, pegged by latest official data at more than 200,000 contracts in futures and options as of a week ago..
Since then open interest, ie the number of live contracts, in corn futures has risen by more than 81,000 lots to 1.70m lots according to exchange data – an increase which in a falling market is seen as reflecting largely fresh short bets by funds.
Benson Quinn Commodities, noting market estimates that managed money was short 231,000 corn contracts as of Monday, plus another 13,000 contracts in the last session, said that “someday they need to take it to the bank” – ie take profit on the bets, putting upward pressure on prices.
On the negative side for prices, ideas of improved Brazilian weather are seen as raising prospects for first crop corn and, via speeding up soybean sowings, second crop corn too (planted largely on land vacated by the soybean harvest).
“Improving weather for Brazil… will facilitate soybean plantings, making way for second corn crop planting progress to commence at a regular timeframe, if weather co-operates,” said Terry Reilly at Chicago-based Futures International.
Indeed, this is a big factor for prices of soybeans too, with CHS Hedging saying that rainfall in Brazil’s top soy-growing state, Mato Grosso, earlier this week were “highly beneficial to soybean planting, and planting should be wrapped up within the next 2-3 weeks.
“This should allow ample planting time for the second corn crop,” after the soy crops are harvested, the broker added.
Still, soybean futures themselves made ground too in Chicago, adding 0.5% to $9.73 a bushel for January delivery, although industry data later on the US crush may determine how sticky these gains are.
The US crush last month, as measured by Nopa, is seen coming in at 164.475m bushels, a little below the elevated 164.6m-bushel number set in October last year.
Wheat futures, having fared relatively well in the last session, on gains attributed largely to profit-taking on short positions, eased by 0.1% to $4.27 ½ a bushel in Chicago this time, amid some concerns over purchases by Egypt, the top importer.
As CHS Hedging noted, “an Egyptian court effectively reinstated a ban on wheat imports that contain any amount of the common grain fungus ergot.
“This reopens a long-standing dispute over Egypt’s import rules that have disrupted trade in the past.”
Still, it is questioned just how much further bears will be able easily to press wheat futures lower yet, with Agritel flagging something of a price floor in Paris too at around E160 a tonne, December basis.
The analysis group flagged support to values in the physical market from a reluctance by producers to sell at current prices, while “positive basis was recorded on the three main French ports for nearby deliveries”.
(Source – https://www.agrimoney.com/news/morning-markets-grains-dodge-china-spurred-commodity-selldown-42242)