By Joe Hoppe
A roundup of key agricultural commodity markets for the week April 29-May 3 by Dow Jones Newswires in Barcelona.
GRAINS & OILSEEDS:
The macro mood is positive as oil prices slip back, the Brazilian real gains against the U.S. dollar and global stock markets recover ahead of a busy week.
The U.S. dollar's rise had previously weakened crucial commodity currencies like the Australian and Canadian dollars, as well as the Chinese yuan. Crude strength also has a strong correlation with agricultural markets, particularly grains, as it is used throughout the agricultural process from fuel to fertilizer.
South American weather has been mixed, with Brazilian weather too hot ahead of May, a critical production month for soybeans. Argentina looks good over the next week for its own corn harvest, but there are still questions around the extent of the damage from leafhopper disease.
U.S. weather forecasts are warm and wet, with some large storm systems set to roll through the driest parts of the U.S. plains again this week. Farmers are planting quickly despite frequent showers--good for production prospects, but bearish for prices. While it is early in the spring planting season, traders are building a risk premium on crop prices and the market will be bullish until the June summer seasonal high, Peak Trading analysts said in a note.
Several key U.S. macroeconomic events are coming up, which could change the trajectory of the U.S. dollar, with the Federal Reserve monetary policy decision on Wednesday and U.S. nonfarm payroll data on Friday. Recent readings show progress curbing inflation has stalled, and the Fed isn't expected to cut interest rates on Wednesday, strengthening the dollar.
There are mixed signals in terms of demand. Brazil's soybean and Argentina's corn demand have been firming due to slow farmer selling and leafhopper disease, but China's import pace has stalled and the country has almost no business booked from the U.S., a bearish signal for U.S. futures, Peak Trading said.
Friday's commitment of traders report indicated hedge funds bought $1.8 billion of agricultural futures in aggregate last week, on geopolitical risks and growing weather concerns, mostly buying grains and selling sugar.
Chicago wheat futures are down 2.6% at $6.06 a bushel, while corn is down 0.9% at $4.46 a bushel. Soybean prices rise 0.1% at $11.78 a bushel.
SOFT COMMODITIES:
Cocoa prices are slipping back from the all-time high of $11,722 a ton, set on April 19. The crop's price has more than doubled since the start of the year though it has fallen 8% in the last week alone. The monthslong surge had been driven by supply-side challenges in West Africa, where 70% of global cocoa is produced.
Friday's commitment of traders report saw broad selling of cocoa from funds, with the net long being reduced to a 14-month low as traders continued to exit an increasingly disorderly market, Saxo Bank's head of commodity strategy, Ole Hansen said in a note.
Rains in West Africa have increased the outlook for the mid-season crop. The front contract showed signs of buying fatigue, so it only needed a spark to ignite a sell-off, Hansen said in emailed commentary.
That said, demand for cocoa hasn't fallen as much as expected, with global grindings--a key metric for gauging demand--dropping just 0.7% on-year in the first quarter of 2024. This offers additional support to high price levels, as the data suggests demand may be stronger than previously forecast, said BMI, a unit of Fitch Solutions, in a note.
Sugar prices have been subdued due to Brazil's strong supply and depreciated currency. Nonetheless, recent adverse weather conditions affecting Brazilian sugar production have led to a modest price recovery from a low of 19.3 cents a pound on April 17, BMI said.
Cocoa is down 9% at $9,640 a metric ton, while sugar is up 2.4% at 19.5 cents a pound. Coffee rises 1.7% at $2.28 a pound.
Write to Joe Hoppe at joseph.hoppe@wsj.com
(END) Dow Jones Newswires
04-29-24 1110ET
