02/01/2018 (Agrimoney.com) - For what it’s worth, bulls had the better of early data out in 2018.

In the soft commodities segment, Indonesia reported coffee exports of 8,649.1 tonnes from Sumatra, the main growing region, last month – a drop of 71% year on year.

And this after a 57% drop in November.

While Indonesia, a major robusta coffee grower, is broadly reckoned to show decent 2017-18 production, it is estimated down year on year by many commentators, such as Rabobank, which sees a 400,000-bag decline to 12.0m bags.

And this against a backdrop of rising domestic consumption, and with weaker prices deterring producer sales too.

The London robusta coffee market has yet to open, to show any reaction to the data.

Palm up

In the grain and oilseeds segment, cargo surveyor Intertek reported a 6.7% rise, month on month, in Malaysian palm oil exports in December.

That reveals a late-month acceleration, despite end-of-year shutdowns in much of the globe, with the pace of shipments showing just 1.0% growth as of December 25.

And the data were reflected in a 1.6% gain to 2,544 ringgit a tonne in Kuala Lumpur palm oil futures for March, as of 09:20 UK time (03:20 Chicago time), making a bright start to the new year, after a poor performance in the last one.

(Kuala Lumpur palm oil futures lost 20.0% last year, on a benchmark contract basis.)

Earlier, palm oil futures for May closed up 1.35 at 5,296 yuan a tonne on the Dalian exchange in China, the top palm-importing country.

The contract is now up 3.7% from a December 22 low.

‘Some optimism around’

In fact, Chinese ag futures broadly started 2018 on a firm note, with Dalian soyoil for May up 1.7% at 5,766 yuan a tonne, Dalian corn for May adding 0.8% to 1,827 yuan a tonne, Zhengzhou cotton for May edging 0.1% higher to 15,010 yuan a tonne, and Shanghai rubber up 1.3% at 14,325 yuan a tonne, although Zhengzhou sugar for May bucked the trend, easing by 0.3% to 5,921 yuan a tonne.

This after the Caixin-Markit manufacturing Chinese purchasing managers’ index for December came in at 51.5, up from 50.8 in November, and the best figure since August. It also beat market expectations of a 50.6 figure.

Whether this rise in Chinese ag prices can set a wider trend… well, there is some optimism around about commodity prospects for this year, after the poor performance of 2017.

Water Street Solutions noted support to sentiment in raw material markets from “continued optimism of global economic activity moving into 2018”.

A fizzling out in the rally in the dollar, which dropped 0.3% in early deals to set a three-month low against a basket of currencies, hardly hurt either.

(A weaker dollar boosts the affordability to buyers of assets, such as many commodities, denominated in the currency.)

‘Funds to extend longs’

However, one worry for bulls in many ags is whether the ample supplies of many crops hampers (again) their attempt at price headway this year.

Richard Feltes at RJ O’Brien said: “The job of grain markets, against backdrop of plentiful US and global stocks, is to sustain low prices to encourage ramped up demand.”

Shorter-term, investors also have the prospect of the index fund rebalancing process to undertake, when funds reweight portfolios back to levels mandated by the index followed – often meaning buying poor performing contracts of last year, and selling gainers.

The trade “expects funds to extend longs in sugar and Kansas City wheat”, Richard Feltes said.

We will find out later, when most US markets reopen, whether funds are onto that process already, although is an early opening, in cotton, already showing some reaction, in easing by 0.02 cents to 78.61 cents a pound for March delivery?

"Given cotton’s [strong] performance across all of 2017, concern is mounting that index funds will reduce their exposure to cotton futures in 2018," said Louis Rose at Rose Commodity Group.