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Jun 21, 2021

China Attempts to Control Commodity Prices

Expansion of oversight suggests Beijing is trying to deter speculation among state-owned companies

China Attempts to Control Commodity Prices

  • China’s government has in recent weeks ordered state owned firms to limit their exposure to foreign commodities.

  • A new rule will bar cash management products from holding riskier securities and limit their use of leverage.

  • China has made token sales of grains from government stocks, and plans to sell metals from state reserves.

  • This would be the first publicly announced release from China’s state stockpiles since 2010.

  • The government’s commodity oversight agency will issue new rules on the management of price indexes for commodities and services.

  • The measures are expected to standardize how price indexes are compiled and improve transparency on the release of information.

FBN’s Take On What It Means: The problem for China is that more debt and more risks to the financial system are making it harder to control domestic markets. The expansion of oversight suggests Beijing is now trying to exert more control and deter speculation among state-owned companies. There is not yet a sign of decreased demand for agricultural products which has been a major factor leading to higher prices.

FBN

Argentina Crop Update

  • The Buenos Aires Grain Exchange reported harvest progress at 42% complete, compared to 38% last week and 71% last year.

  • June exports to date total 1.9 million tonnes, on pace to reach 3.8 million versus 3.1 million last month, but down compared to 4.5 million last year.

  • BAGE’s production forecast is at 48 million tonnes, unchanged from last week and above the USDA at 47 million.

  • The Rosario Grain Exchange increased its crop estimate to 50 million tonnes from 48.5 million previously.

  • Soybean harvest is near the end at 99.4% complete, with 43.3 million tonnes of beans harvested.

  • BAGE projects soy production at 43.5 million tonnes versus the USDA forecast at 47 million.

  • Wheat planting was 57% complete compared to 37% last week and 58% last year.

FBN’s Take On What It Means: Late season rains were beneficial for crops as seen with better yields in the provinces of Cordoba and Santa Fe. Better grain availability is leading to quicker exports, with values below the US. This has led to lower cash prices at the Gulf in the near term.

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Kevin McNew

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Magazine

Marketwatch: Dec, 03

cmdty National Corn Price Idx: ZCPAUS.CM

open: 5.6309
high: 5.6797
low: 5.6159
close: 5.6309

cmdty National Soybean Price Idx: ZSPAUS.CM

open: 11.9852
high: 12.1581
low: 11.9477
close: 12.111

cmdty National Hard Red Winter Wheat Price Idx: KEPAUS.CM

open: 8.119
high: 8.2535
low: 8.054
close: 8.2002

cmdty National Soft Red Winter Wheat Price Idx: ZWPAUS.CM

open: 7.5939
high: 7.7096
low: 7.5239
close: 7.6525