Ag markets faced an extremely rocky macroeconomic picture today, as asset prices came down on fresh fears over the Chinese economy, while some upbeat production forecasts added fuel to the grain selloff, while a falling real pressured sugar and coffee.
An index of Chinese manufacturing activity turned more negative on Friday, triggering another sell off in Chinese shares, which ended the day down more than 4%, leaving the Shanghai Composite index is now down 12% this week.
There was other bad news from other equity markets, with the FTSE index in London posting its worst week in 2015, with other European markets also negative, while the down Jones headed for a 5% loss for the week.
And the commodity picture is, if anything gloomier, as crude oil continues its rout, and the Bloomberg commodity index drops to its lowest level since 2002.
ProFarmer results
The final results of the influential ProFarmer crop tour were released on Friday.
The service saw US 2015 corn production at 13.323bn bushels, based on a yield of 164.3 bushels per acre.
This compares to the USDA forecast of 13.686 billion bushels on a yield of 168.8 bushels per acre.
On paper this estimate may appear bullish for prices, but corn markets were lifted earlier in the week by some preliminary ProFarmer yield estimates that came well short of the USDA figures, while in the last two days scouts have been seeing stronger yields, meaning the forecasts were higher than many in the market expected on Wednesday.
December corn closed down $3.65 ¼ a bushel.
Soybeans, which have high exposure both to Chinese demand and oil prices, saw larger losses.
Pro Farmer forecast U.S. soybean production at 3.887 billion bushels with an average yield of 46.5 bushels per acre, compared to a USDA forecast of 3.916 billion bushels and yield at 46.9 bushels per acre.
November soybeans closed down 1.9% at $88.9 ½ a bushel.
France data
There was a slew of strong wheat data from Europe, as crop consultants ADAS reported the UK winter wheat harvest 40% complete as of Tuesday, with early yield indications at between 8.3 and 8.6 tonnes a hectare, a 9-13 percent increase on the 10-year average of 7.7 tonnes.
And a report from farm office FranceAgriMer said French farmers have got all the winter crop in, with the only doubts remaining being as to exactly how high a record this crop will set.
December Paris wheat closed down 1.7% at E175.75 a tonne.
Canadian cuts
But there were reports of a smaller wheat crop in Canada.
Statistics Canada on Friday saw the all-wheat crop at 24.63m tonnes, behind trade expectations of 25.6m tonnes and the smallest in five years.
Hot, dry conditions in Saskatchewan and Alberta stunted growth of canola, durum and spring wheat.
September Chicago wheat closed down 1.4% at $4.99 ½ a bushel, while the December contract closed down 1.4% at $5.04 a bushel.
Canadian canola production forecasts also missed estimates at 13.34m tonnes, where trade had seen 13.6m tonnes.
This would be the smallest crop since 2010. Farmers were forced to replant canola in Manitoba after damaging May frosts.
In Winnipeg November canola closed up 0.4% at CAD480 a tonne, one of very few ag commodities to make any gains on the day.
Currency woes
The picture for softs was even worse, as the Brazilian
currency tumbled further.
Brazil’s economy is closely linked with China, and the news from Shanghai weighed heavy on the real on Friday.
The real sank over 1% against the dollar, nothing unusual given the volatility in the currency recently, but noteworthy in a day when the greenback was also down nearly 1% against a basket of currencies.
A fall in the real is bearish for coffee and sugar, of which Brazil is the world’s biggest exporter.
Fresh rains
And fresh rains in Brazil arrived at an opportune moment in the flowering of next season’s coffee crop, bringing additional pressure to bear on prices.
December arabica closed down 4.5%, at $1.2645 a pound, to close down more than 10% on the week.
Robusta prices got some support from continued farmer hoarding in Vietnam.
September robusta closed down 1.2%, at $1,619 a tonne.
Brazil harvest
Raw sugar was also down, as the fast pace of the Brazilian harvest dealt an additional blow to prices.
Industry association Unica reported that cane mills in Brazil’s key center-south region produced 2.86m tonnes of sugar in the first half of August, up from 2.79m in the second half of July and at the top end of market expectations, after a dry spell allowed mills to pick up the pace of crushing.
October raw sugar closed 1.7% down, at 10.44 cents a pound.
Cocoa couldn’t survive the ag selloff either, ending down as New York December cocoa ended down 1.9%, at $3,074 a tonne.
