Morning markets: weaker dollar underpins crop price gains

The risk of a Monday full of such superlatives for crops, record highs in rubber and cotton (closing) for instance, was that it would spark a round of profit taking in the next session.

Tuesdays are, after all renowned for, "turnarounds" in Chicago. And with the end of year providing an extra reason for investors to close position….

However, a selling wave had yet to appear, as of 08:15 GMT, whencotton was up the, expanded, exchange limit again, taking the fibre to a record (post US Civil War) top of 159.12 cents a pound, up 5.0 cents, or 3.2%.

As Ker Chung Yang at Phillip Futures in Singapore noted, cotton is being boosted by "worries of tight supplies outpacing demand into the coming year.

"Supplies out of number-two producer India are in doubts as the government has chosen to tread carefully on export issues, limiting cotton yarn exports."

Korea moves

Cotton, and other dollar denominated crops, also had the following wind of a weaker greenback, which reversed its gains of yesterday, and more, shedding 0.5%.

The currency, which has become an investment gauge of fear, eased after South Korea's live firing session did not spark retaliation in North Korea, as had been feared after recent hostilities.

(Indeed, Asian stock markets were firm too, with Japan's Nikkei index closing up 1.5% and Hong Kong's Hang Seng adding 1.4%. Shanghai stocks gained 1.8%.)

A weaker dollar supports prices of assets denominated in them more affordable to buyers in other currencies.

'Pattern of dryness'

So the default position was a modest rise, which corn and soybeansmanaged too, boosted by persistent fears of dryness in Argentina, a big producer and exporter of both crops.

"Growing conditions have been less than favourable in many key growing areas," Brian Henry at Benson Quinn Commodities said.

"Although Argentina may receive rainfall on Thursday and Friday of this week the pattern of dryness has shown very few signs of letting up. Any moisture would be welcome, but subsoil moisture is limited."

Investors may be persuaded to keep a risk premium "until they see a legitimate shift in the weather pattern", he said, adding that he did "not expect the spec trade to create new short positions at this time", in soybeans at least.

'Lingering bullish sentiments'

Indeed, the dryness is hitting a sensitive agricultural spot, following Argentina's drought-ravaged crops a couple of seasons ago, and with it being a La Nina year, which has a habit of depriving the country of moisture.

Furthermore, the current lack of moisture is hitting corn crops at a vulnerable time, in pollination.

Mr Ker said that Chicago corn, "may make the attempt to close above the $6 a bushel level", given the "lingering bullish sentiments" on the grain, also fed by a cut by Informa Economics on Friday to its estimate for American sowings next year.

Corn was certainly doing its best to finish above $6 a bushel for the first time in two years, standing 0.5% higher at $6.02 ½ a bushel for March delivery.

January soybeans edged 0.1% higher to $13.16 ¾ a bushel.

Drier Australia

Wheat, however, eased a touch, with drier weather, in Australia, a depressant for prices in hastening the country's delayed harvest.

"The weather outlook remains clear of rain for the next week for South Australia, Victoria and southern half of New South Wales," Australia & New Zealand Bank said, while noting rain on its way for parts of Queensland and northern New South Wales.

Chicago's March lot eased 0.25 cents to $7.69 ¼ a bushel.

Rain worries

More joy for bulls was had in rubber, which topped 413 yen a kilogramme to set a record high amid strong demand, notably from China, and weather-constrained production.

Indeed, Indonesian rubber also sold at a record high of approaching $4.90 a kilogramme, as rains hampered supply prospects, with possible floods forecast for parts of Thailand too, including the rubber production area of Surat Thani.

Concerns over the rain also helped palm oil, of which Indonesia is the top producer, gain 1.5% to 3,569 ringgitt a tonne in Kuala Lumpur, Malaysia, which is also suffering inundations.

(Source: http://www.agrimoney.com/marketreport/morning-markets-weaker-dollar-underpins-crop-price-gains--887.html)