MARKET DEVELOPMENT
Morning Markets: Palm Oil, Weather, Corn Turn Selling To Soy
Morning Markets: Palm Oil, Weather, Corn Turn Selling To Soy
15/08/2013 (Agrimoney.com) - After some arguably bullish statistics, a bearish one.
While investors continue to debate the extent to which US Department of Agriculture downgrades on Monday to domestic corn and soybean yield forecasts may be reversible, the Malaysian Palm oil Board released some indisputably price negative data.
Palm oil stocks in the world's second-ranked palm producing, and exporting, country rose 1.0% in July, from June, to 1.67m tonnes.
Not only was that the first rise of 2013, it also defied expectations of a 3% fall in inventories last month, to a little under 1.6m tonnes.
Export Data
The data snuffed out a rally in the vegetable oil from the 2,137 ringgit-a-tonne mark reached late last month which marked the lowest price since October 2009, and which had accelerate in the last session thanks to strong Malaysian export data for the first 10 days of this month.
Cargo surveyor Societe Generale de Surveillance pegged the increase in exports at 26%, month on month, while Intertek Testing Services put the rise at 22%.
"The strong demand for palm oil exports could be due to the weaker ringgit and Chinese restocking ahead of the Mid-Autumn festival celebrated in September," Phillip Futures said.
Kuala Lumpur palm oil, having risen 4.1% over the first two days of the week, fell back 0.6% to 2,283 ringgit a tonne for October delivery.
'Potential for A Bigger Yield'
That helped throw a bit of a pall over the oilseed complex as a whole, including Chicago soybeans, which also took a dent from some improvement in the weather outlook.
The latest run of the European weather model, while still dry for this week, "is wetter over the central and upper Plains and western Corn Belt" for next week, and "much warmer" too, WxRisk.com said.
"The soybean crop still has a chance to improve its yield potential over the next several weeks as was seen last year as rains finally returned to the Midwest late in the month of August," Kim Rugel at Benson Quinn Commodities said.
"The northern crop needs rain and needs heat and both look to be in the offing over the next two weeks."
Higher temperatures should "help spur growth of the soybean plant after three weeks of below normal daytime temps and very cool evenings", Ms Rugel said.
Indeed, if this forecast proves correct, "the US soybean crop has potential for a bigger yield and higher production" than the USDA forecast on Monday.
Prices Ease
As an extra depressant, futures in China's Dalian market fell too, by 0.6% to 4,424 yuan a tonne.
Prices in China, the top soybean importer, are being particularly closely watched as the government is expected this week to auction off a further 500,000 tonnes of the oilseed, a factor which could affect import needs.
Furthermore, in Chicago, some investors are cautious over soybean prices at levels above 2.7 times those of corn, as they are now on a new crop basis, well above levels below 2.2 reached earlier this year.
Soybeans for November fell 0.6% to $12.21 a bushel as of 09:40 UK time (03:40 Chicago time).
Controversial Methodology
That, indeed, represented an underperformance against corn, which added 0.3% to $4.48 ½ a bushel for December delivery.
Still, that was a limp rebound after corn's collapse of more than 3% in the last session, as investors realised the role of a methodological change in the USDA's surprise downgrade on Monday in its Wasde crop report of 1.1 bushels per acre to 154.4 bushels per acre in its estimate for the domestic corn yield.
"When looking at the methodology of the August Wasde corn yield estimate, we can see why the market has been quick to reject it," one broker said.
"The USDA is using the five-year average ear weight for corn. In the last five years we have had some very extreme conditions," including last year's once-in-a-generation (hopefully) drought.
"We still think we could see a corn yield north of 160 bushels per acre," the broker said, echoing comments from the likes of Deutsche Bank and Goldman Sachs.
'Secular Bear Market'
The tumble in the last session meant that a key reversal signal on Monday, when December corn traded outside the range of the previous session and ended higher, "has been wiped out.
"Managed money has been building a large net short corn position and they don't seem to be swayed by the latest Wasde yield estimate."
At RJ O'Brien, Richard Feltes said that it was "significant to note that corn open interest on Monday actually advanced nominally which suggests that managed fund corn shorts, which may have added to shorts on Tuesday, aren't panicking" and closing their positions.
Indeed, hedge funds, whose net short hit a record as of last week, could also take comfort in a "plunging Mid-South corn basis".
"The secular bear market in both corn and soy still in play, although new lows in soybeans will take more time to unfold," Mr Feltes said.
'Rather Trendy Position'
Corn's, small, bounce proved too little to release the pressure on fellow grain wheat, in which investors have been reluctant to allow a premium of $2 a bushel or more, December basis.
"The Chicago market led the decline lower and seems to be assuming its rather trendy position as the whipping post for traders stuck long corn and/or soybeans," Benson Quinn Commodities said.
Indeed, "the wheat markets are once again approaching oversold conditions," besides levels "that could attract some attention" on export markets.
"Wheat probably doesn't need to be much cheaper than this unless the Black Sea and European Union lower their offers," the broker said.
Still, September wheat fell 0.2% to $6.27 a bushel.
'Abundant Supplies'
Among soft commodities, arabica coffee followed corn in showing some recovery from a drubbing in the last session, its biggest loss in three weeks.
"As of end July, coffee sales in Brazil were slower than usual which left the market with more coffee supplies," Joyce Liu at Phillip Futures said.
"The abundant supplies would continue to pressure prices to the recent four-year lows," she adding, if also noting fresh concerns over a frost in Brazil, the top arabica-producing country.
Arabica beans for September rebounded 0.3% to 120.90 cents a pound.
This time, it was raw sugar's turn for a bit of profit-taking, falling 0.2% to 17.21 cents a pound, after a run of five successive positive sessions.
While investors continue to debate the extent to which US Department of Agriculture downgrades on Monday to domestic corn and soybean yield forecasts may be reversible, the Malaysian Palm oil Board released some indisputably price negative data.
Palm oil stocks in the world's second-ranked palm producing, and exporting, country rose 1.0% in July, from June, to 1.67m tonnes.
Not only was that the first rise of 2013, it also defied expectations of a 3% fall in inventories last month, to a little under 1.6m tonnes.
Export Data
The data snuffed out a rally in the vegetable oil from the 2,137 ringgit-a-tonne mark reached late last month which marked the lowest price since October 2009, and which had accelerate in the last session thanks to strong Malaysian export data for the first 10 days of this month.
Cargo surveyor Societe Generale de Surveillance pegged the increase in exports at 26%, month on month, while Intertek Testing Services put the rise at 22%.
"The strong demand for palm oil exports could be due to the weaker ringgit and Chinese restocking ahead of the Mid-Autumn festival celebrated in September," Phillip Futures said.
Kuala Lumpur palm oil, having risen 4.1% over the first two days of the week, fell back 0.6% to 2,283 ringgit a tonne for October delivery.
'Potential for A Bigger Yield'
That helped throw a bit of a pall over the oilseed complex as a whole, including Chicago soybeans, which also took a dent from some improvement in the weather outlook.
The latest run of the European weather model, while still dry for this week, "is wetter over the central and upper Plains and western Corn Belt" for next week, and "much warmer" too, WxRisk.com said.
"The soybean crop still has a chance to improve its yield potential over the next several weeks as was seen last year as rains finally returned to the Midwest late in the month of August," Kim Rugel at Benson Quinn Commodities said.
"The northern crop needs rain and needs heat and both look to be in the offing over the next two weeks."
Higher temperatures should "help spur growth of the soybean plant after three weeks of below normal daytime temps and very cool evenings", Ms Rugel said.
Indeed, if this forecast proves correct, "the US soybean crop has potential for a bigger yield and higher production" than the USDA forecast on Monday.
Prices Ease
As an extra depressant, futures in China's Dalian market fell too, by 0.6% to 4,424 yuan a tonne.
Prices in China, the top soybean importer, are being particularly closely watched as the government is expected this week to auction off a further 500,000 tonnes of the oilseed, a factor which could affect import needs.
Furthermore, in Chicago, some investors are cautious over soybean prices at levels above 2.7 times those of corn, as they are now on a new crop basis, well above levels below 2.2 reached earlier this year.
Soybeans for November fell 0.6% to $12.21 a bushel as of 09:40 UK time (03:40 Chicago time).
Controversial Methodology
That, indeed, represented an underperformance against corn, which added 0.3% to $4.48 ½ a bushel for December delivery.
Still, that was a limp rebound after corn's collapse of more than 3% in the last session, as investors realised the role of a methodological change in the USDA's surprise downgrade on Monday in its Wasde crop report of 1.1 bushels per acre to 154.4 bushels per acre in its estimate for the domestic corn yield.
"When looking at the methodology of the August Wasde corn yield estimate, we can see why the market has been quick to reject it," one broker said.
"The USDA is using the five-year average ear weight for corn. In the last five years we have had some very extreme conditions," including last year's once-in-a-generation (hopefully) drought.
"We still think we could see a corn yield north of 160 bushels per acre," the broker said, echoing comments from the likes of Deutsche Bank and Goldman Sachs.
'Secular Bear Market'
The tumble in the last session meant that a key reversal signal on Monday, when December corn traded outside the range of the previous session and ended higher, "has been wiped out.
"Managed money has been building a large net short corn position and they don't seem to be swayed by the latest Wasde yield estimate."
At RJ O'Brien, Richard Feltes said that it was "significant to note that corn open interest on Monday actually advanced nominally which suggests that managed fund corn shorts, which may have added to shorts on Tuesday, aren't panicking" and closing their positions.
Indeed, hedge funds, whose net short hit a record as of last week, could also take comfort in a "plunging Mid-South corn basis".
"The secular bear market in both corn and soy still in play, although new lows in soybeans will take more time to unfold," Mr Feltes said.
'Rather Trendy Position'
Corn's, small, bounce proved too little to release the pressure on fellow grain wheat, in which investors have been reluctant to allow a premium of $2 a bushel or more, December basis.
"The Chicago market led the decline lower and seems to be assuming its rather trendy position as the whipping post for traders stuck long corn and/or soybeans," Benson Quinn Commodities said.
Indeed, "the wheat markets are once again approaching oversold conditions," besides levels "that could attract some attention" on export markets.
"Wheat probably doesn't need to be much cheaper than this unless the Black Sea and European Union lower their offers," the broker said.
Still, September wheat fell 0.2% to $6.27 a bushel.
'Abundant Supplies'
Among soft commodities, arabica coffee followed corn in showing some recovery from a drubbing in the last session, its biggest loss in three weeks.
"As of end July, coffee sales in Brazil were slower than usual which left the market with more coffee supplies," Joyce Liu at Phillip Futures said.
"The abundant supplies would continue to pressure prices to the recent four-year lows," she adding, if also noting fresh concerns over a frost in Brazil, the top arabica-producing country.
Arabica beans for September rebounded 0.3% to 120.90 cents a pound.
This time, it was raw sugar's turn for a bit of profit-taking, falling 0.2% to 17.21 cents a pound, after a run of five successive positive sessions.