MARKET DEVELOPMENT
Morning Markets: Palm Loses Mojo. But Cotton, Wheat Revive
Morning Markets: Palm Loses Mojo. But Cotton, Wheat Revive
05/11/2013 (AgriMoney.com) - Palm oil had been a beacon of hope for grain and oilseed bulls, soaring to one-year highs in Kuala Lumpur, underpinned by ideas that production might not be as strong as thought, thanks to heavy rains in its main South East Asian production regions, while demand is proving resilient.
However, after a clean sweep of positive sessions last week, the vegetable oil opened this one with a decline, falling 1.5% to 2,590 ringgit a tonne.
'Have to be cautious'
They had reason to take profits too, with key industry data due next Monday.
"Investors have to be cautious on the release of the official stock, export and production data by the Malaysian Palm Oil Board due November 11," Phillip Futures said.
A stronger-than-expected production number would "dampen the upward movement in palm oil.
"We may expect investors to remain at the sidelines or profit-take for a few days before the MPOB release."
Crude input
Furthermore, a tumble in crude oil prices in the last session was seen as coming to bear.
Brent crude actually rebounded 0.5% on Monday to retake $106 a barrel, but only from the lowest close on Friday in nearly four months.
Crude prices have a large bearing on palm oil given that the vegetable oil is largely used in making biofuels.
Kuala Lumpur's benchmark January contract dropped 1.6% to 2,585 ringgit a tonne as of 09:55 UK time (03:55 Chicago time).
'Hard for soymeal'
Still, that did not set the tone for the whole oilseeds complex.
Sure, soymeal, the feed ingredient produced by processing soybeans, continued its downward correction, as the US harvest brings fresh supplies of soybeans to crush.
Chicago's December lot dropped 0.2% to $394.00 a short ton.
As Jefferies Bache put it: "As crush picks up seasonally, it may be hard for soymeal to hold gains, especially considering that prices above $400 per ton are high from an historical standpoint."
'Remain bearish'
However, soyoil kept the bullish flag aloft within the vegetable oils complex, adding 0.6% to 41.85 cents a pound for December delivery, still playing a bit of catch up from palm oil's rise last week, and given hope by ideas, espoused by Jefferies Bache, that a two-year upcycle may be just beginning.
And that gave support to soybeans too, against what had appeared some negative trends, with decent weather in the US for harvest (dry), and for sowing in South America (wet, in some parts of Brazil and Argentina, anyway).
"With pressure coming from the active harvesting of the US soybeans crop as well as possible increase in estimates for the soybean crop size, we remain bearish on soybeans for the week," Phillip Futures said.
Harvest upgrades
Negative technical have hardly helped either, with the January lot in the last couple of weeks falling to below all its major moving averages.
Nor did an upgrade by FCStone to its estimate for the US crop to 3.27bn bushels, on a yield of 42.8 bushels per acre, above the US Department of Agriculture's 3.149bn bushels and 41.2 bushels per acre, if below Informa's figures on Friday of 3.298bn bushels and 43.3 bushels per acre.
The figures come ahead of the USDA's latest Wasde crop report on Friday, which is expected to raise estimates of both the domestic soybean and corn crops.
However, ideas of good signs of demand from exporters also helped shore up prices, and Chicago's January soybean contract stood 0.4% higher at $12.56 ¼ a bushel.
FCStone revision
Corn faced many of the same pressures as soybeans, in terms of decent conditions for US harvest and South American plantings, and ideas of Wasde upgrades on Friday.
"With seasonal harvest pressure, as well as expectations of an upward revision to the US corn crop size, we are bearish on US corn for the week," Phillip Futures said.
But the fear is that the upgrade for corn will prove even more significant than for soybeans – concerns stoked by FCStone's revisions.
The broker, which has less of a reputation than Informa for sanguine estimates, lifted its forecast for the harvest to 14.367bn bushels, on a yield of 161.2 bushels per acre.
That matched Informa for yield, but was ahead on production, at 14.223bn bushels.
The USDA's current figures are 13.843bn bushels for production and 155.3 bushels per acre for yield.
Corn for December eased 0.2% to $4.26 ½ a bushel.
China downgrade
Corn at least had some support from fellow grain wheat, which added 0.3% to $6.69 ½ a bushel for December, with the rains in South America not so helpful on this score, given that they are occurring during harvesting in Brazil and are too late in much of Argentina to reap crop improvement.
Indeed, they could present a crop threat if they persist, threatening quality downgrades as have already happened in countries such as China.
…thinking of which, the USDA office in Beijing cut its forecast for the Chinese wheat harvest to 118m tonnes, 3m tonnes below the official USDA figure.
China's crop is particularly under the microscope because of it poor quality, which has left large imports on the agenda.
Still, the USDA office actually left its forecast for China's imports at 9.5m tonnes, large by historical standards but in line with that the department, and investors, are already factoring in.
'Expectedly poor results'
In fact, the Argentine harvest has started out on a weak note, although from areas that suffered particularly from dry weather during the season.
"Their harvest has started with expectedly poor results from areas that dried out," Benson Quinn Commodities said, flagging the threat to Argentine wheat exports.
"Given tight old crop supplies and issues with export licenses, I have doubts that any more than 3m tonnes would be available, and probably not until next spring," implying more demand pushed elsewhere, to the likes of the US.
As for the Australian harvest, over which ideas are also mixed, the signal from Sydney futures was mildly bullish, with the benchmark January lot adding Aus$1 to Aus$280.00 a tonne.
'Subdued demand'
Among soft commodities, cotton tried another attempt to pull out of its longest losing streak in more than 30 years, and end positive for the first time in 12 sessions.
New York's December lot added 0.3% to 76.81 cents a pound.
"Subdued demand and record global cotton inventories continue to weigh heavily on the fibre," Luke Mathews at Commonwealth Bank of Australia said.
However, there has been plenty of idea that 75 cents a pound or so should provoke technical buying.
Vietnamese setback
And New York coffee managed a bound too, by 0.5% to 106.10 cents a pound for December delivery, managing so far this session not to put in a fresh four-year low.
The bean was boosted by talks of heavy rains to disrupt the Vietnamese harvest of robusta coffee, of which the country is the top producer.
London robusta beans for January added 0.6% to $1,498 a tonne.
However, after a clean sweep of positive sessions last week, the vegetable oil opened this one with a decline, falling 1.5% to 2,590 ringgit a tonne.
'Have to be cautious'
They had reason to take profits too, with key industry data due next Monday.
"Investors have to be cautious on the release of the official stock, export and production data by the Malaysian Palm Oil Board due November 11," Phillip Futures said.
A stronger-than-expected production number would "dampen the upward movement in palm oil.
"We may expect investors to remain at the sidelines or profit-take for a few days before the MPOB release."
Crude input
Furthermore, a tumble in crude oil prices in the last session was seen as coming to bear.
Brent crude actually rebounded 0.5% on Monday to retake $106 a barrel, but only from the lowest close on Friday in nearly four months.
Crude prices have a large bearing on palm oil given that the vegetable oil is largely used in making biofuels.
Kuala Lumpur's benchmark January contract dropped 1.6% to 2,585 ringgit a tonne as of 09:55 UK time (03:55 Chicago time).
'Hard for soymeal'
Still, that did not set the tone for the whole oilseeds complex.
Sure, soymeal, the feed ingredient produced by processing soybeans, continued its downward correction, as the US harvest brings fresh supplies of soybeans to crush.
Chicago's December lot dropped 0.2% to $394.00 a short ton.
As Jefferies Bache put it: "As crush picks up seasonally, it may be hard for soymeal to hold gains, especially considering that prices above $400 per ton are high from an historical standpoint."
'Remain bearish'
However, soyoil kept the bullish flag aloft within the vegetable oils complex, adding 0.6% to 41.85 cents a pound for December delivery, still playing a bit of catch up from palm oil's rise last week, and given hope by ideas, espoused by Jefferies Bache, that a two-year upcycle may be just beginning.
And that gave support to soybeans too, against what had appeared some negative trends, with decent weather in the US for harvest (dry), and for sowing in South America (wet, in some parts of Brazil and Argentina, anyway).
"With pressure coming from the active harvesting of the US soybeans crop as well as possible increase in estimates for the soybean crop size, we remain bearish on soybeans for the week," Phillip Futures said.
Harvest upgrades
Negative technical have hardly helped either, with the January lot in the last couple of weeks falling to below all its major moving averages.
Nor did an upgrade by FCStone to its estimate for the US crop to 3.27bn bushels, on a yield of 42.8 bushels per acre, above the US Department of Agriculture's 3.149bn bushels and 41.2 bushels per acre, if below Informa's figures on Friday of 3.298bn bushels and 43.3 bushels per acre.
The figures come ahead of the USDA's latest Wasde crop report on Friday, which is expected to raise estimates of both the domestic soybean and corn crops.
However, ideas of good signs of demand from exporters also helped shore up prices, and Chicago's January soybean contract stood 0.4% higher at $12.56 ¼ a bushel.
FCStone revision
Corn faced many of the same pressures as soybeans, in terms of decent conditions for US harvest and South American plantings, and ideas of Wasde upgrades on Friday.
"With seasonal harvest pressure, as well as expectations of an upward revision to the US corn crop size, we are bearish on US corn for the week," Phillip Futures said.
But the fear is that the upgrade for corn will prove even more significant than for soybeans – concerns stoked by FCStone's revisions.
The broker, which has less of a reputation than Informa for sanguine estimates, lifted its forecast for the harvest to 14.367bn bushels, on a yield of 161.2 bushels per acre.
That matched Informa for yield, but was ahead on production, at 14.223bn bushels.
The USDA's current figures are 13.843bn bushels for production and 155.3 bushels per acre for yield.
Corn for December eased 0.2% to $4.26 ½ a bushel.
China downgrade
Corn at least had some support from fellow grain wheat, which added 0.3% to $6.69 ½ a bushel for December, with the rains in South America not so helpful on this score, given that they are occurring during harvesting in Brazil and are too late in much of Argentina to reap crop improvement.
Indeed, they could present a crop threat if they persist, threatening quality downgrades as have already happened in countries such as China.
…thinking of which, the USDA office in Beijing cut its forecast for the Chinese wheat harvest to 118m tonnes, 3m tonnes below the official USDA figure.
China's crop is particularly under the microscope because of it poor quality, which has left large imports on the agenda.
Still, the USDA office actually left its forecast for China's imports at 9.5m tonnes, large by historical standards but in line with that the department, and investors, are already factoring in.
'Expectedly poor results'
In fact, the Argentine harvest has started out on a weak note, although from areas that suffered particularly from dry weather during the season.
"Their harvest has started with expectedly poor results from areas that dried out," Benson Quinn Commodities said, flagging the threat to Argentine wheat exports.
"Given tight old crop supplies and issues with export licenses, I have doubts that any more than 3m tonnes would be available, and probably not until next spring," implying more demand pushed elsewhere, to the likes of the US.
As for the Australian harvest, over which ideas are also mixed, the signal from Sydney futures was mildly bullish, with the benchmark January lot adding Aus$1 to Aus$280.00 a tonne.
'Subdued demand'
Among soft commodities, cotton tried another attempt to pull out of its longest losing streak in more than 30 years, and end positive for the first time in 12 sessions.
New York's December lot added 0.3% to 76.81 cents a pound.
"Subdued demand and record global cotton inventories continue to weigh heavily on the fibre," Luke Mathews at Commonwealth Bank of Australia said.
However, there has been plenty of idea that 75 cents a pound or so should provoke technical buying.
Vietnamese setback
And New York coffee managed a bound too, by 0.5% to 106.10 cents a pound for December delivery, managing so far this session not to put in a fresh four-year low.
The bean was boosted by talks of heavy rains to disrupt the Vietnamese harvest of robusta coffee, of which the country is the top producer.
London robusta beans for January added 0.6% to $1,498 a tonne.