Yet still the smell of market cordite is wafting around financial markets.
If it isn’t Chinese shares plunging (they actually gained 2.0% on Thursday), it is New York ones, with the S&P 500 index tumbling overnight 2.5% to record its biggest one-day fall since September.
And many other markets sided with the S&P rather than Shanghai stocks overnight, with Tokyo shares shedding 2.7%, Sydney ones 1.6% and Seoul equities 0.9%. London shares opened down 1.2%.
The declines were blamed largely on oil, after data showing a large rise in US inventories, and Brent crudeearly on Thursday touched $29.73 a barrel, its weakest since February 2004, before recovering a little to stand at $30.17 a barrel as of 09:15 UK time (03:15 Chicago time), a loss of 0.5% on the day.
Dry savannah
Against that backdrop, a little caution was perhaps unsurprising in grain markets, which in the main got off, again, to a somewhat negative start, despite the brighter trading later in the last session.
That said, there were markets which avoided early selling pressure.
One was Johannesburg maize, which for March delivery, and for the white maize (food) contract, jumped 2.5% to 4,866 rand a tonne, back close to the high of 4,952 rand a tonne touched last week.
And this against a stable rand, whose weakness of late has exacerbated the rise in South African food prices.
The SA Weather Service said that the country was experiencing its lowest rainfall in 55 years, and that while rains were expected to improve in March, at 100-200mm, they would not replenish dams, besides coming too late to avoid significant crop damage.
‘Compounding impact’
Palm oil also kept its nose above water for a second session, gaining 1 ringgit to 2,412 ringgit a tonne in Kuala Lumpur, helped by revived production concerns, after Malaysia-based Sime Darby, the world’s largest palm plantations group, warned of potential damage to its output from drought, blamed on El Nino.
“The recent haze would have a similar compounding impact with the prolonged dry period, affecting fruits and disrupting oil extraction as well as crop production,” the group added.
The comments countered more bearish talk earlier in the week, when brokerage Oriental Pacific Futures, noting rain relief for Indonesian plantations, said that palm oil futures were on their way to 2,200 ringgit a tonne.
Gapki, the Indonesian palm oil association, forecast a rise of 1m tonnes to 33.5m tonnes in the country’s output this year.
‘Trade sceptical’
But in Chicago, grains struggled, as ideas of ample world supplies smothered the more bullish sentiment encouraged by a slew of US data on Monday, which cut estimates for domestic corn and soybean production last year, and pegged winter wheat sowings at their second lowest in a century.
In fact, Chicago soft red winter wheat futures for March shed 0.6% to $4.75 a bushel, despite the prospect of far lower 2016 US production than investors had been banking on.
Kansas City hard red winter wheat for March was 0.5% lower at $4.73 ½ a bushel.
One negative factor is that the “trade remains sceptical” of the sowings data, particularly for hard red winter wheat, for which seedings were seen slumping by 9% to the lowest in at least 30 years, Benson Quinn Commodities said.
‘More sober mood’
And then there is the fact that even if the data are right, it might not be enough to tighten the US wheat balance sheet.
Tobin Gorey at Commonwealth Bank of Australia said that while the sowings data were a “pleasant surprise… as we, among others, integrate those numbers into [2016-17] balance sheets a more sober mood takes over.
“Despite the prospective drop in US hard red winter wheat planting, the US will add to already high hard red winter wheat inventory by 2016 season‑end unless there is sharp rise in exports.”
And the short-term prospect of US exports is hardly being encouraged by a relatively low discount of Kansas City wheat to Paris wheat of just $8 a tonne, below the typical $15-25 a tonne, Mr Gorey added.
Data later
More on US exports will be known later, when the US Department of Agriculture unveils weekly export sales data expected at 150,000-350,000 tonnes for wheat – a modest figure by historical standards, but one which would be an improvement on the (holiday affected) 76,524 tonnes the week before.
For corn, US export sales are expected at 400,000-650,000 tonnes, up from 252,921 tonnes the previous week.
And for soybeans, the figure is expected at 900,000-1.3m tonnes, up from 638,714 tonnes last time.
‘May see a shortage’
Still, the prospect of improved US export data was not enough to excite row crop markets either, with corn for March dropping 0.5% to $3.56 ¼ a bushel in Chicago, if managing to stay just ahead of its 10-day moving average.
OK, prices are rising in Brazil, a somewhat bullish sign, after exports at a record 30m tonnes last year provoked concerns about whether there is enough left for domestic users.
“Some trade groups are worries Brazil may see a shortage in corn supplies for feed demand,” Terry Reilly at Chicago broker Futures International said.
But elsewhere in South America, Argentina looks a more definite bearish factor, with its recent export-friendly reforms encouraging late sowings of the next crop as well as shipments of stored supplies.
‘Significant player’
The Rosario grains exchange overnight lifted by 3.6m tonnes to 23.8m tonnes its estimate for Argentine corn output in 2015-16, albeit a figure which remains below the USDA’s forecast of 25.6m tonnes.
Meanwhile, US broker CHS Hedging said that “Argentina looks to be a significant player in the export market.
“Their government issued export licenses for up to 7.0m tonnes of corn since Christmas and they now have no export tax to contend with.”
And as for somewhat upbeat US ethanol production on Wednesday, showing output last week back above 1m barrels a day (implying strong corn usage for making the biofuel), large stocks and the weak energy markets put a cloud over that data.
“The better ethanol grind is something to continue paying attention to, but with the margin environment being as stressed as it is I would anticipate the pace to weaken,” Benson Quinn Commodities said.
Too much of a good thing?
As for soybeans, they eased 0.1% to $8.79 ¼ a bushel for March delivery, caught between 50-day and 100-day moving averages.
Rains in central and northern Brazil have improved prospects for crops there – although with the caution that moisture may be getting excessive.
“South American seasonal conditions have vastly improved though so that could cap how high prices can go for now,” CBA’s Tobin Gorey said.
“Soaking rain should continue in northern Brazil for the remainder of the week,” precipitation which, “while welcome for now, does have the potential to make conditions in some regions too wet for soybean crops”.
Soybean plants do not like “getting their feet wet”, commentators say.
‘Waiting for other shoe to drop’
There is also the support elsewhere in the oilseeds market from palm oil to factor in, and Chicago soyoil for March nudged 0.1% higher to 29.58 cents a pound.
Still, many investors are awaiting industry data on Friday on the US soybean crush, which some feel may herald a downgrade to estimates for processing volumes in 2015-16.
Benson Quinn Commodities said: “The market is now waiting for other shoe to drop,” after the USDA amid Tuesday’s data slew cut estimates for US soybean and soymeal exports this season.
Investors expect the NOPA crush data, for December, to come in at 157.8m bushels, compared with 156.1m bushels in November and 165.4m bushels in December last year.
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