MARKET DEVELOPMENT
AM Markets: Soybeans Ease, Despite Firm China Import Data
AM Markets: Soybeans Ease, Despite Firm China Import Data
09/12/2015 (AgriMoney.com) - The storm which drove commodities, as measured by the CRB index, to a 13-year low in the last session, abated a bit.
Crude oil futures, which hit a seven-year low in the last session, after a lack of agreement between producing countries on output curbs, recovered a little
Brent crude added 0.9% to $41.10 a barrel as of 10:00 UK time (04:00 Chicago time).
Furthermore, the dollar eased a touch, by 0.2% against a basket of currencies, making dollar-denominated exports such as many ags that much more affordable.
Soybean import surge
But it was not as if a full-scale Turnaround Tuesday – the idea beloved of Chicago traders that grain prices reverse on the second session of the week a strong direction in the first – was in progress either.
Soybeans in fact were 0.3% lower at $8.79 ¼ a bushel for January delivery, dropping back below their 40-day moving average, having surrendered their 50-day line in the last session.
And this despite some upbeat news in the form of customs data showing large Chinese soybean imports last month, of 7.39m tonnes – a jump of 23% year on year, and 34% month on month, if below the record of 9.5m tonnes reached in July.
Still, the figure took imports for the first 11 months to a clear record of 72.6m tonnes, up 15.4% year on year.
'Record pace'
"China's soybean import volumes continued at a record pace," Australia & New Zealand Bank said.
"Insufficient supplies of other high protein animal feed have driven China's demand in 2015."
The bank forecast that China's imports for the full 2015 "could now reach 80m tonnes for the first time, up from 71m tonnes in 2014, and 63m tonnes in 2013".
The data showed that China's imports of edible vegetable oils rose too, by 45% year on year to 580,000 tonnes, taking the total for the first 11 months of 2015 to 6.0m tonnes, a gain of 1.3%.
(The statistics, by the way, are only initial data, and give only an individual crop breakdown for soybeans, with rubber also included on a natural-and-synthetic-combined basis.)
Palm down
Still, the data failed to provoke a positive reaction in edible oil markets - which have been in the spotlight of late largely thanks to El Nino, blamed for dryness threatening palm oil output in the key South East Asian producing countries, and US legislative changes seen as promoting domestic soyoil production.
Palm oil futures eased by 0.4% to 4,720 renminbi per tonne on the Dalian exchange in China, and dropped by 1.8% to 2,393 ringgit a tonne in Kuala Lumpur, seen as feeling a delayed reaction from the tumble in crude oil in the last session.
(Vegetable oils such as palm oil are the raw material for making biodiesel, and hence tend to be affected by energy markets.)
Furthermore, the Malaysian Palm Oil Board is expected on Thursday to unveil data showing that domestic palm oil stocks last month nudged marginally higher still from October's record high, to 2.84m tonnes.
'Threatening lawsuits'
In Chicago, soyoil futures for January fell by 0.8% to 31.00 cents a pound – now down 4.8% from the four-month high hit in the last session, before the vegetable oil succumbed to some doubts about that US legislation, which proposes to switch a tax credit to producers from blenders.
That would ensure it applied only to domestic volumes rather than imported ones as well, but has naturally not been well received through the sector.
Richard Feltes at Chicago broker RJ O'Brien talked of a "counter attack" by the US energy industry on the proposal, "threatening lawsuits and a cut in biodiesel blending".
The extent of speculators' net long in soyoil, at a five-month high of 40,000 lots according to latest weekly data, didn't help either, in making the position potentially look a bit crowded, and encouraging some hedge funds to take profits.
This has meant "additional selling pressure", Mr Feltes said.
'Rush of beans'
If this was one reason for investors to go cautious on soybeans, another was the prospect as early as next week of the liberalisation of the Argentine peso, as proposed by the administration of president-elect Mauricio Macri, which was seen as potentially encouraging the sale by farmers of some of their hoard of soybeans.
Tobin Gorey at Commonwealth Bank of Australia noted that investors had not taken "well to the Argentinian government's decision to remove exchange rate controls in the (very) near future.
"Traders and investors will be worried that Argentinean farmers will now bring a rush of beans to the market once the peso declines."
Weather debate
Meanwhile, weather in Brazil has apparently improved for soybeans being sown, or newly planted, although it has to be said that there are different takes on this.
CHS Hedging said that "South American weather conditions remain mostly favourable, with only slight concerns of a few dry spots in Brazil.
"Talk has also begun about the potential for rust in some of the wetter areas of Brazil, but let's remain calm for now."
However, at Martell Crop Projections, Gail Martell said that "tropical drought has lingered in Brazil from November into early December, causing concerns over soybean prospects.
"Last week the forecast looked hopeful for increased rainfall in Mato Grosso and the tropics at large, but heavy showers have not developed.
"Rainfall in the upcoming week is expected to continue below average in Mato Grosso and smaller soybean states to the north and east.
Corn recovery
Corn, however, did a little better at staging some limited kind of Turnaround Tuesday bounce, although March gained just 0.1% to $3.73 ½ a bushel, just staying ahead of its 10-day moving average.
The direction of oil prices has a big influence on corn, given the proportion of the US crop used in making bioethanol.
US export news has taken a little bit more of a positive turn, with the US Department of Agriculture on Monday reporting not only the sale of 115,000 tonnes of the grain to Mexico, but overall shipments last week at 492,000 tonnes, up more than 40% week on week.
That said, "we are currently running 193m bushels behind the pace needed to meet USDA export estimates" for the full 2015-16, CHS Hedging said.
Hedge fund considerations
But wheat for March eased 0.3% to $4.81 ½ a bushel, lacking yet the short-covering support which curbed losses in the last session, with the extent of hedge fund short positions raising ideas their appetite for such bets might have been met for now.
"It would be unusual for wheat to post new lows while it carries largest managed fund short since late May," RJ O'Brien's Richard Feltes said.
Trade later in the big crops may also be dependent on positioning ahead of Wednesday's USDA Wasde report although, in that the briefing does not include changes to domestic production estimates, it is not viewed as such a key edition of the publication.
Investors expect only small changes to estimates for US stocks at the close of 2015-16, with upgrades of 7m bushels to 918m bushels for wheat and 8m bushels to 1.768bn bushels for corn.
For soybeans, the estimate for the year-end carryout is seen being downgraded by 3m bushels to 462m bushels.
Crude oil futures, which hit a seven-year low in the last session, after a lack of agreement between producing countries on output curbs, recovered a little
Brent crude added 0.9% to $41.10 a barrel as of 10:00 UK time (04:00 Chicago time).
Furthermore, the dollar eased a touch, by 0.2% against a basket of currencies, making dollar-denominated exports such as many ags that much more affordable.
Soybean import surge
But it was not as if a full-scale Turnaround Tuesday – the idea beloved of Chicago traders that grain prices reverse on the second session of the week a strong direction in the first – was in progress either.
Soybeans in fact were 0.3% lower at $8.79 ¼ a bushel for January delivery, dropping back below their 40-day moving average, having surrendered their 50-day line in the last session.
And this despite some upbeat news in the form of customs data showing large Chinese soybean imports last month, of 7.39m tonnes – a jump of 23% year on year, and 34% month on month, if below the record of 9.5m tonnes reached in July.
Still, the figure took imports for the first 11 months to a clear record of 72.6m tonnes, up 15.4% year on year.
'Record pace'
"China's soybean import volumes continued at a record pace," Australia & New Zealand Bank said.
"Insufficient supplies of other high protein animal feed have driven China's demand in 2015."
The bank forecast that China's imports for the full 2015 "could now reach 80m tonnes for the first time, up from 71m tonnes in 2014, and 63m tonnes in 2013".
The data showed that China's imports of edible vegetable oils rose too, by 45% year on year to 580,000 tonnes, taking the total for the first 11 months of 2015 to 6.0m tonnes, a gain of 1.3%.
(The statistics, by the way, are only initial data, and give only an individual crop breakdown for soybeans, with rubber also included on a natural-and-synthetic-combined basis.)
Palm down
Still, the data failed to provoke a positive reaction in edible oil markets - which have been in the spotlight of late largely thanks to El Nino, blamed for dryness threatening palm oil output in the key South East Asian producing countries, and US legislative changes seen as promoting domestic soyoil production.
Palm oil futures eased by 0.4% to 4,720 renminbi per tonne on the Dalian exchange in China, and dropped by 1.8% to 2,393 ringgit a tonne in Kuala Lumpur, seen as feeling a delayed reaction from the tumble in crude oil in the last session.
(Vegetable oils such as palm oil are the raw material for making biodiesel, and hence tend to be affected by energy markets.)
Furthermore, the Malaysian Palm Oil Board is expected on Thursday to unveil data showing that domestic palm oil stocks last month nudged marginally higher still from October's record high, to 2.84m tonnes.
'Threatening lawsuits'
In Chicago, soyoil futures for January fell by 0.8% to 31.00 cents a pound – now down 4.8% from the four-month high hit in the last session, before the vegetable oil succumbed to some doubts about that US legislation, which proposes to switch a tax credit to producers from blenders.
That would ensure it applied only to domestic volumes rather than imported ones as well, but has naturally not been well received through the sector.
Richard Feltes at Chicago broker RJ O'Brien talked of a "counter attack" by the US energy industry on the proposal, "threatening lawsuits and a cut in biodiesel blending".
The extent of speculators' net long in soyoil, at a five-month high of 40,000 lots according to latest weekly data, didn't help either, in making the position potentially look a bit crowded, and encouraging some hedge funds to take profits.
This has meant "additional selling pressure", Mr Feltes said.
'Rush of beans'
If this was one reason for investors to go cautious on soybeans, another was the prospect as early as next week of the liberalisation of the Argentine peso, as proposed by the administration of president-elect Mauricio Macri, which was seen as potentially encouraging the sale by farmers of some of their hoard of soybeans.
Tobin Gorey at Commonwealth Bank of Australia noted that investors had not taken "well to the Argentinian government's decision to remove exchange rate controls in the (very) near future.
"Traders and investors will be worried that Argentinean farmers will now bring a rush of beans to the market once the peso declines."
Weather debate
Meanwhile, weather in Brazil has apparently improved for soybeans being sown, or newly planted, although it has to be said that there are different takes on this.
CHS Hedging said that "South American weather conditions remain mostly favourable, with only slight concerns of a few dry spots in Brazil.
"Talk has also begun about the potential for rust in some of the wetter areas of Brazil, but let's remain calm for now."
However, at Martell Crop Projections, Gail Martell said that "tropical drought has lingered in Brazil from November into early December, causing concerns over soybean prospects.
"Last week the forecast looked hopeful for increased rainfall in Mato Grosso and the tropics at large, but heavy showers have not developed.
"Rainfall in the upcoming week is expected to continue below average in Mato Grosso and smaller soybean states to the north and east.
Corn recovery
Corn, however, did a little better at staging some limited kind of Turnaround Tuesday bounce, although March gained just 0.1% to $3.73 ½ a bushel, just staying ahead of its 10-day moving average.
The direction of oil prices has a big influence on corn, given the proportion of the US crop used in making bioethanol.
US export news has taken a little bit more of a positive turn, with the US Department of Agriculture on Monday reporting not only the sale of 115,000 tonnes of the grain to Mexico, but overall shipments last week at 492,000 tonnes, up more than 40% week on week.
That said, "we are currently running 193m bushels behind the pace needed to meet USDA export estimates" for the full 2015-16, CHS Hedging said.
Hedge fund considerations
But wheat for March eased 0.3% to $4.81 ½ a bushel, lacking yet the short-covering support which curbed losses in the last session, with the extent of hedge fund short positions raising ideas their appetite for such bets might have been met for now.
"It would be unusual for wheat to post new lows while it carries largest managed fund short since late May," RJ O'Brien's Richard Feltes said.
Trade later in the big crops may also be dependent on positioning ahead of Wednesday's USDA Wasde report although, in that the briefing does not include changes to domestic production estimates, it is not viewed as such a key edition of the publication.
Investors expect only small changes to estimates for US stocks at the close of 2015-16, with upgrades of 7m bushels to 918m bushels for wheat and 8m bushels to 1.768bn bushels for corn.
For soybeans, the estimate for the year-end carryout is seen being downgraded by 3m bushels to 462m bushels.