Often, ag markets reverse heading into a weekend, as investors
sitting on gains bank profits, rather than risking the newsflow turning against
them in the days they are unable to trade.
But not this time.
futures, having closed the last session at their lowest since late February
last year, set a fresh 15-month low in early deals of 13.29 cents a pound,
before recovering a little ground in late trading to stand at 13.39 cents a
pound, down 0.6% on the day.
"Sugar bears continue to have the 'story' in their bulging
pockets with the general commodity weakness and little by way of threat to the
fundamental sugar background supply picture," said Tom Kujawa at Sucden
Financial, flagging too the negative impact of a further cut by Petroras to fuel
Petrobras, Brazil's state-controlled oil company, lowered its
average prices at refineries for gasoline by 2.3%, and for diesel by 5.8%.
A weaker gasoline price undermines value of rival ethanol too, in turn feeding through
into weaker sugar prices, given that the sweetener and the biofuel compete for
their portions of the Brazilian cane crush.
The move by Petrobras "effectively is music to the ears of
sugar bears as the safety net of the sugar market's ethanol parity is lowered
giving a suddenly larger potential opportunity for current shorts" in the
sweetener, Mr Kujawa said.
Ethanol parity, ie the level at which making either ethanol
and sugar is equally appealing financially for Brazilian cane crushers, had
been reckoned at about 13 cents a pound in sugar terms ahead of the gasoline
Also in New York, cotton
futures extended their decline, standing down 0.9% at 68.88 cents a pound for
December delivery, and giving the contract a fresh 2017 low.
That fall was contrary even to the expectations of Tobin
Gorey at Commonwealth Bank of Australia, who has been for some while forecast
downward pressure on prices, thanks to the prospect of stronger production in
2017-18, at a time when hedge funds have been sitting on large net long
"Cotton prices are on a five-day losing streak that make the
market, in technical speak, look oversold," he said earlier.
However, at Texas A&M University, Dr John Robinson, who
has also warned over prices falls, flagged a negative technical indicator, in
futures' fall below 200-day moving averages earlier this week.
"The approach to and violation of the 200-day moving average
may explain some of the extra weight on prices in terms of short run technical
selling and tripping buy stops," he said.
"Growers should be poised and ready to quickly take advantage
of new crop price rallies."
Canada not so dry
In grain markets, meanwhile, investors' willingness to stick
with the recent trend meant further gains for wheat prices.
which has the focus of bullish sentiment, thanks to drought hurting crops in
the northern US Plains, added a further 1.7% to $6.43 a bushel for July with a
little over an hour of trading to go in Minneapolis.
That said, that remained a little below the two-year intraday
high of $6.45 ¾ a bushel.
On the negative side for prices, condition ratings overnight
for the Saskatchewan spring wheat crop (typically equivalent to about half US
output) came in 75% "good" or "excellent", well down year on year, but also far
ahead of the 45% rating attributed to the US crop earlier this week.
Furthermore, there have been some rains in parts of the
northern Plains wheat belt to confront dryness.
But whether the rains are enough to do much in terms of
repairing the crop is another matter. (Traders expect a gain of about 3 points
in Monday's good or excellent rating for US spring wheat.)
And further dryness is expected.
"The technicals in Minneapolis are overbought, but
conditions are expected to be dry which will hamper the areas that have
struggled with dryness to this point," said Benson Quinn Commodities.
CHS Hedging said that "wheat markets continue to rally as
weather concerns continue in the Dakotas and Montana.
"Some precipitation in the central and eastern areas of the
Dakotas is expected going into this weekend, but this still leaves a large
portion of spring wheat country parched."
'Slowing harvest and
Meanwhile, weather has hardly been ideal for winter wheat
either, which is being harvested further south in the US, in the central
"Reports of hail and rain in the winter wheat country are
slowing harvest and causing damage to isolated areas in Kansas and Nebraska,"
CHS Hedging said.
Furthermore, there are worries over winter wheat crops
elsewhere too, notably in Australia, the European Union (the top producer) and
Ukraine, thanks to dry weather expected to continue in all three jurisdiction.
"Ukraine, EU, Western Australia and a portion of south west
Canada are labouring under dry conditions which is providing support to wheat,"
said Richard Feltes at RJ O'Brien.
"Following the trimming of US hard red spring wheat yields
and a low protein US hard red winter wheat crop, the wheat market is not in the
mood for further problems."
Mr Feltes added that he was hearing reports of "Midwest
elevators upping bids for soft red winter wheat in a race to capture as mush
harvest movement as possible to lock in wide board carries".
The strong cash market helped soft red winter wheat futures
soar 2.8% top $4.66 ½ a bushel in late deals for July delivery, setting a
one-year high for a spot contract.
Fund buying has also been credited with fuelling the rise,
given that Chicago wheat, the world's most liquid wheat contract, is the speculators'
In Paris, meanwhile, wheat for December closed up 1.4% at
E177.25 a tonne, the contract's highest finish in four months.
European "crop conditions could deteriorate with high
temperatures announced for next week, especially in most sensitive areas",