Crops stand, relatively, firm against market rout

  Farm commodities pulled back, but stopped short of collapse, on a dire day for financial markets, supported by the thinness of world supplies and a key US crop tour next week.

Crop and livestock futures were lower across the board as of 17:00 GMT, depressed by a round of liquidation which saw shares closed down heavily in Europe – London’s FTSE 100 ended down 4.5% with Frankfurt’s Dax plunging 5.8% – and post losses of more than 3% in New York.

As an extra headwind to dollar-denominated assets, the greenback rose 0.8% as investors took succour in the world’s (present) reserve currency. A dearer greenback makes US exports, including farm commodities, more expensive for buyers in other currencies.

New York crude slumped 4.5% back to $83 a barrel.

Wheat’s run to end?

However, farm commodities, while losing their appeal among many investors as defensive assets, proved significantly more resilient than shares, and most commodities too.

Chicago wheat for September was down 1.7% at $7.15 ¾ a bushel, looking set for its first negative finish in eight sessions, if posting losses in line with the average for commodities, according to the CRB index.

But Minneapolis spring wheat, at $9.10 a bushel for September, limited its losses to 0.7%, supported by continued talk of disappointing US yields and quality, amid a delayed harvest.

And corn and, especially, soybeans proved less vulnerable than the average commodity too, thanks in part to the prospect of the ProFarmer crop tour next week.

‘Impressed with soybeans’

"The tour is a bit of a focus for the market," Jerry Gidel at North America Risk Management Services said.

"You will hear lots of chatter about that next week, what’s good or bad out there, and it may be giving people reason to pause a little."

Corn for December, the best-traded lot, fell 1.2% to $7.16 ¾ a bushel, and November soybeans 0.1% to $13.65 a bushel.

"I’m really impressed with soybeans. The market took them right down among the moving averages, only for it to bounce back again," Mr Gidel said.

Moving average lines are viewed as key technical indicators, breaches of which are often taken as heralding further movement in that direction. However, the November soybean contract recovered from an intraday low of $13.45 a bushel, well below a clutch of moving averages at the 13.50-13.55 level.

Further downgrades

While soft commodities also posted losses, they came nowhere near erasing gains of the last session, with sugar supported by continued fears for output from Brazil, the top producer and exporter.

"Expectations are circulating now of a sub-500m tonne [cane] crush, with some even suggesting 460m tonnes, and a sugar output less than 30m tonnes," Nick Penney at Sucden Financial said.

"Fears are also that the current crush [season] will end early."

New York sugar for October stood 1.3% lower at 29.11 cents a pound in late deals.

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