The bears who had the better of early ag trading in the last session struggled a bit this time, as investors proved unwilling to let prices drift too far without input from US markets, many of which remain closed for now.
Sure, rubber extended its decline of last time, dropping 1.8% in Shanghai to 12,825 yuan a tonne for September delivery, with the contract now down nearly 5% over two sessions.
The decline follows Chinese auto data showing a, small, drop in production in May, and reflects too broad jitters over North Korea’s launch of missiles with intercontinental range, fears which dogged Asian stockmarkets earlier on.
Prices of rubber, as an industrial commodity, tend to be more vulnerable to such macro factors.
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That said, they are affected too by values of oil, the source of synthetic rubber.
And with Brent crude hanging in just below $50 a barrel, adding 0.2% to $49.73 a barrel as of 09:30 UK time (03:30 Chicago time), Tokyo rubber futures for December managed to recover from negative territory to stand up 0.2% at 197.80 yen a kilogramme.
Sugar drops
Staying in China, Zhengzhou sugar for September dropped 1.8% to 6,190 yuan a tonne for September delivery, a one-year low for the contract, continuing to play catch up with the decline in New York futures.
In China itself, there may be cause for thinking that prices would be supported, given flooding in parts of Guangxi, China’s top sugarcane-growing province, and the far tougher regime on imports (both legal and illegal) that Beijing has imposed in an effort to support the domestic industry.
China in late May, following lobbying by domestic sugar mills, imposed hefty tariffs on out-of-quota sugar imports, making it much more expensive to bring in sugar from major producers such as Thailand and Brazil.
It also cut import permits to around half last year’s levels.
‘Forecasts of declining production’
But palm oil, for instance, failed to extend its losses of the last session, closing on China’s Dalian exchange up 4.5% at 5,320 yuan a tonne.
With China a major importer of the vegetable oil, that helped palm make ground too in Malaysia, the second-ranked exporter, where the benchmark September contract added 0.9% to 2,530 ringgit a tonne.
Futures are also being supported by fresh ideas of disappointing output in Malaysia, talk which fostered a late revival in Kuala Lumpur in the last session.
Kuala Lumpur-based Oriental Pacific Futures flagged “forecasts of declining production which could dent local stock levels”.
The Malaysian Palm Oil Board will on July 10 unveil monthly data on Malaysian palm oil supply and demand.
‘Environmental stresses’
Meanwhile, in the grain and oilseed markets – Winnipeg canola, which jumped 1.4% in the last session, amid worries over dryness in Canada’s Prairies, and waning crop expectations in Europe – added a further 0.5% to Can$507.40 a tonne.
Overnight, officials in Manitoba said that “precipitation amounts are below average for much of the province.
“Crops in the south west region [of the province] and the western part of the central region would benefit from moisture.”
Indeed, in the central area “some [canola] fields have yellowed/purpling areas due to environmental stresses”.
Still, farmers’ crops overall “in most regions are in good to excellent condition”.
Prices of canola, as an oil-heavy, rather than meal-heavy, oilseed also tend to be influenced strongly by vegetable oil markets.
‘Traders are cautious’
As for Paris wheat, early indications showed a firm start.
As a positive factor for the market, Egypt, the top wheat-importing country, returned overnight with a tender for the grain.
That said, “Black Sea wheat should be again the more competitive origin” at the tender, and extend its run of tender victories, said Agritel.
Indeed, the analysis group underlined the broadening discount of Black Sea wheat to US and European Union peers.
“Despite a weekly increase of wheat prices on Chicago of more than $30 a tonne, and more than E10 a tonne on Euronext, Black Sea traders are cautious to translate the rally into cash market,” Agritel said.
With harvest set to provoke a surge in fresh supplies, “traders are waiting before raising forward prices”.
