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The dollar maintained its upward move, hitting a three-month high against a basket of currencies, helped by better-than-expected US economic growth data. US gross domestic product grew at a 3.0% annual rate in the July-to-September period, above forecasts of a 2.5% figure.
And with dollar strength came further pressure on prices of dollar-denominated grains, curtailing their competitiveness for exports, and with US wheat futures suffering in particular.
‘Shifting buying patterns’
Sure, there are signs of demand around for wheat, with Saudi Arabia tendering for 475,000 tonnes of hard wheat, for instance, and Ethiopia having issued a further, 200,000-tonne tender (albeit with a distant November 29 deadline) even while its latest 400,000-tonne tender is still live.
But for the US, when the dollar is undermining competitiveness, at a time when latest export data have proved disappointing (for the major wheat classes)...The idea of the origin being bypassed was only enhanced by a report that Mexican buyers, the biggest buyers of US wheat, were investigating purchases from Australia, Germany and Poland, besides eyeing up a second shipment of Argentine supplies. Mexico interest in purchasing “wheat from Argentina shows global scope and shifting buying patterns, as abundant global stocks continue to provide a buyer’s mark”, said Benson Quinn Commodities.
Chicago vs Paris
Chicago wheat futures for December, the global benchmark, stood 1.3% lower at $4.26 a bushel in late morning deals, That contrasted with small gains in Paris futures, up 0.3% at E163.00 a tonne in late trading, favoured by a weaker euro. Europe’s single currency stood down 0.6% at $1.158 per E1 – down 2.0% in two days. London wheat for November gained 1.0% to £139.40 a tonne, as sterling took its two-day losses to 1.1%.
‘Harvest in full swing’
Nor did corn fare well in Chicago, shedding 0.8% to $3.47 ¾ a bushel, despite some signs of interest for US exports.The US Department of Agriculture revealed that Spain had bought 132,000 tonnes of US corn, a deal that Richard Feltes at RJ O’Brien said “suggests that Ukraine corn is overpriced” – Ukraine being a nearer origin for EU supplies. However, besides the weakness in wheat, a rival grain in many uses, corn also felt pressure from ideas of an accelerating US harvest, bringing supplies to weigh on values. “Harvest is expected to be in full swing over the weekend and next week,” said CHS Hedging. “With the exception of some light snow in Minnesota today and light rains in the eastern Corn Belt, weather for harvest looks open for the next 7-10 days.”The USDA weekly crop progress report on Monday is expected to show corn harvesting “50% complete versus 38% last week, and the five-year average at 73%”, the broker said.
‘Yields falling short of last year’
In fact, soybeans fared best among Chicago’s big three, adding 0.3% to $9.85 ¼ a bushel for January delivery, the best-traded contract. Again, there was a US export sale to report, of 238,000 tonnes of the oilseed to China, the top importer, easing concerns there over the impact both of the strong dollar and a drop in prices on China’s Dalian futures exchange to a series of contract lows. Indeed, Richard Feltes flagged the support to soy prices from “brisk US soy export sales and more reports of US soybean yields falling short of last year”. This from a harvest which is well through, meaning peak harvest pressure is probably past.
The oilseeds complex was also helped by a sanguine reaction by palm oil futures to a Malaysian government estimate that the country’s output of the vegetable oil will rise next year to 20.5m tonnes. That is well above the 20.0m-tonne estimate last week from respected analyst Dorab Mistry. That said, Malaysia also sees its production this year at 20.0m tonnes, well above an estimate from Mr Mistry of 19.3m tonnes, and above expectations from many other commentators too. Palm oil futures edged 0.1% higher to 2,817 ringgit a tonne in Kuala Lumpur, taking gains this month to 4.5%.
In Chicago, rival vegetable oil soyoil stod up 0.5% at 34.68 cents a pound in late morning deals, finding particular strength in ideas of slow soybean sowings in Argentina, the top exporter of the vegetable oil.
‘Weather is improving’
Still, a far bigger gainer was arabica coffee, which for December delivery stood up 1.6% in late deals in New York, returning above its 20-day moving average. Sure, a weaker real undermines the value of assets over which Brazil is a key influence, while rains are due for needy central areas. “The weather in the producing belt is improving,” said Brazil’s CNC producers’ group, adding that Somar Meteorologia forecasts rains “in almost every state” this weekend.
‘Losses now established’
Still, the CNC also flagged that “some observers consider losses in coffee plantations now established, due to the high temperatures and the drought that prevailed in previous weeks”. Furthermore, the idea of producers holding back sales in hope of higher prices, as highlighted by Marex this week, appears a growing market talking point.There is also talk of an report circulating from Terra Forte which is downbeat on Brazilian output prospects, and this supportive for prices, cautioning for instance that higher tree planting densities, in raising moisture needs, have rendered Brazilian plantations more vulnerable to drought. Signally, Brazilian cash prices, as measured by Cepea, have turned upwards of late, adding 0.9% on Thursday to stand flat for the month, in local currency terms.