By admin       2017-11-22

Morning markets: cotton, corn futures give back a few gains : Has Thanksgiving come early? Certainly, ag markets looked in holiday mode in early deals, somewhat becalmed, although some traders were saying that kind of thing in the last session only for cotton, for instance, to spring to life. Then, “March futures leapt a cent in minutes”, Tobin Gorey at Commonwealth Bank of Australia, adding that “the fibre has broken through a recent tight trading range to now be at a two-month high”. ‘Bearish take’ : The puzzle has been why futures soared, given ideas of a large US harvest, which is ticking along nicely. (US Department of Agriculture data overnight showed the US harvest at 74% complete, up 10 points week on week, and 2 points ahead of the average pace.) Mr Gorey said: “We suspect, the market’s pessimism was just too obvious.” Whatever, Ecom, flagging “favourable harvest progress in US southern states”, saw reason to believe that the gains might prove temporary. “The overall statistical picture still points to a bearish take on the market with world stocks outside of China at historically high levels,” the trading house said. Prices ease : Stocks inside China, being unavailable for world trade, are seen as less important in determining global prices. That said, there is still the odd mention of the potential for China returning to higher levels of imports, having run down its state inventories substantially through auction programmes. While cotton futures did lose some ground in New York, shedding 0.4% to 70.56 cents a pound for March delivery, as of 09:30 UK time (03:40 Chicago time), they still hung on to the vast majority of gains of the last session. Signally, the contract was holding above its 200-day moving average too. ‘Conditions to improve’ : Another gainer of the last session, corn, also dropped this time, by 0.3% to $3.44 a bushel in Chicago for March delivery, with the USDA data overnight providing little cause for alarm. While US corn harvest progress, at 90%, was 1 point behind the average, after, as Mr Gorey said, “harvesting was halted in much of the US Corn Belt region over the weekend due to rain and freezing temperatures”, the outlook is more benign. “Weather forecasters expect conditions for growers to improve during the week,” he said. At Texas A&M University, Dr Mark Welch reminded of the decent global corn production picture, saying that “the November Geoglam Crop Monitor showed mostly favourable early season crop conditions in South America, though noted were some flooding conditions in southern corn growing areas of Argentina. “The only poor corn conditions were reported in Ukraine,” where “harvest is about complete and yields are down reflecting dry conditions earlier this season”, but a factor already known to the market. ‘Arbitrage opportunity’ : Meanwhile, thinking of China, there remains no confirmation of the talk of large orders which swept the Chicago market last week. Dalian corn futures, however, continue to edge higher, adding 0.2% to 1,691 yuan a tonne for January delivery, and taking gains this month to 2.1%. Is this a sign that no imports are on their way, or of the potential for imports to make sense? (After all, Dalian futures are trading at the equivalent of $255 a tonne, or $7 a bushel.) “Internal values in China versus export values would indicate an arbitrage opportunity exists,” said Benson Quinn Commodities. Palm down : Back in Chicago, soybeans eased all of 0.1% to $9.89 ¼ a bushel for January delivery, with a watch remaining on South American weather, and in particular that in Argentina, where traders have been worried over growing dryness. “The forecast is not ideal for the next two weeks but most areas will see some rains with temperatures normal to below supporting bean planting,” Benson Quinn Commodities said. The oilseed was helped by resilience in soyoil this time, which added 0.1% to34.99 cents a pound – not a big gain, but far better than rival palm oil could manage in Kuala Lumpur, where the February lot dropped 1.4% to 2,591 ringgit a tonne. Earlier it touched a fresh three-month low of 2,587 ringgit a tonne, continuing to feel pressure from India’s decision to double to 30% the import tax on crude palm oil. Corn-soybeans vs wheat : Wheat was one crop which had some credentials for showing price gains, with the USDA crop progress data overnight showing a 2 point drop to 52% in the proportion of winter wheat in “good” or “excellent” condition. Investors had expected an unchanged rating. Still, Chicago’s December lot managed only a 0.1% rebound to $4.22 ¼ a bushel in early deals, with the extent of fund short-covering unveiled in data on Friday continuing to act as a bit of a deterrent to gains. “If the prospects of the funds being forced to cover shorts diminishes, the hopes for higher trade also diminish,” Benson Quinn Commodities said. In fact, the broker proposed that wheat may be the butt of spread trades, with “some of those that are looking to add length in corn and beans are hedging the position by selling Chicago wheat”.

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