The cotton market is having trouble deciding which way it wants to turn.
After a jump to 58.29 cents a pound on Monday, in line with other ags, New York’s benchmark May contract has been short on commitment to a trend, closing within 0.07 cents (0.1%) of that mark in the following three sessions.
It did investigate trading lower on Wednesday, dropping to 57.52 cents a pound where it bounced off the 20-day moving average.
In the last session, the contract reached 58.89 cents a pound, only to shy away from a confrontation with its 40-day moving average.
Orders vs shipments
Sure, US export sales data for last week, released on Thursday, might have been expected to have got a positive response, coming in at 224,900 running bales for upland cotton, a rise of 22% week on week, and of a further 16,900 running bales of pima, a gain of 31%.
That took to about 80% the cotton that the US has sold, as a proportion of the US Department of Agriculture forecast for exports for 2015-16, which has more than four months still to run.
However, the trouble is the pace of actual shipments which, at 186,000 running bales last week, were short of the pace needed to hit USDA expectations.
“Total shipments will need to average around 236,000 running bales per week for the remainder of the current marketing year in order to meet the USDA’s target,” said Louis Rose at the Rose Report.
China rumours
Still, overhanging the market, for week, has been anticipation that China will release more cotton from its huge state stocks of the fibre, with rumour and speculation of the volume, timing and terms imposed.
“Some analysts and traders continue to believe that an announcement is imminent from China regarding release of reserve stocks,” Mr Rose said.
“Other market participants continue to report rumours that reserve sales will not commence until mid-to-late April, at the earliest, and we agree.”
It looked like, in early deals at least, it could be the fears of a looming announcement which were winning out a bit, with the May lot down 0.4% at 58.14 cents a pound as of 09:45 Uk time (04:45 Chicago time) – although, of course, don’t rule out a rebound to somewhere near 58.29 cents a pound by the close.
‘Concern wheat will burn’
In Chicago grains, volatility was not in vogue either.
If the wheat market is currently a measure, largely, of weather threats for US Plains winter crop, then temperatures there at the moment are not turning out too cold.
As Terry Reilly at Futures International noted, the forecast was for temperatures to “dip below freezing” overnight, prompting “concern the wheat will burn from the cold temperatures”.
Still, at Benson Quinn Commodities, Brian Henry said that “I am not convinced the cold temperatures are going to cause major damage”.
And nor was the market, with May soft red winter wheat futures moving all of 0.1%, upwards, in Chicago to $4.63 a bushel.
Kansas City-traded hard red winter wheat, the type grown in the southern Plains, was 0.25 cents lower at $4.70 ½ a bushel, with its premium back below $0.08 a bushel from a high of $0.14 a bushel hit earlier in the week.
Gasc to return?
On the bearish side, Futures International’s Terry Reilly flagged expectations for Ukraine’s agriculture ministry that the country’s farmers may need to replant “only” 15% of winter grains crops.
“This downplays ideas that one third of the winter grain crop was severely affected by unfavourable weather conditions,” he said.
Still, more supportive for prices was an idea that Egypt’s Gasc authority may return soon to buy more wheat, on top of the 4.2m tonnes it has already purchased.
“Egypt said they have enough wheat to last them through early July – normally we see such announcements a day before they buy wheat,” Mr Reilly said.
Stable corn
Corn, meanwhile, for May gained 0.1% to $3.68 ¾ a bushel, continuing a trade which, like cotton, has seen the contract close for the rest of the week within an ace of Monday’s settlement.
“Charts have built in solid support at the 50-day moving average, or $3.66 ½ a bushel,” said Benson Quinn Commodities, making the market perhaps sound much more dynamic than it has been of late.
Even solid US export sales, of 1.23m tonnes, failed to bring lasting gains, while bears have failed so far to make stick ideas of a prospective strong start to Midwest plantings.
“Rising temperatures across have the Midwest have sparked suggestions that US farmers will try get more corn in the ground, earlier, and at the expense ofsoybeans,” said Tobin Gorey at Commonwealth Bank of Australia.
Soybeans vs corn
In fact, it was soybeans which showed the most volatility among Chicago’s big three, adding 0.4% to $9.01 ¼ a bushel for May delivery, making a second stab at its the first close in 2016 above $9.00 a bushel for a spot contract.
The potential for a bit of a swing in US acreage to corn from soybeans seems to be becoming a bit of a theme, with Allendale earlier this week underlining it, and Societe Generale also saying that “with current weather generally favourable and suggesting an early spring, we could see further acreage shifts from soybeans to corn.
“This could help to tighten the projected US balances a bit further, providing some support to prices,” the bank said, if issuing some downbeat price forecasts nonetheless.
Rising oils
Still, eyes are also on soyoil, which maintained its winning run, adding 0.4% to 33.53 cents a pound for May, and earlier setting a fresh eight-month high of 33.70 cents a pound.
Tobin Gorey at Commonwealth Bank of Australia said that the soybean market continues “to look toward the strength in the vegetable oil complex – driven by concerns over dryness in South East Asia”, the major area for growing palm oil.
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