Bears, after being bruised heading into the weekend, emerged
from it in full force, sending grain and coffee markets back into reverse.
Losses were steepest in arabica
coffee, which tumbled 3.9% to 165.35 cents a pound for July delivery,
reversing all the last session's gains, on a downbeat estimate for Brazil's crop,
and removing a bit more premium too.
Indeed, the close gave the contract to its lowest finish in
getting on for four months, with selling pressure really kicking in after the
lot failed once again to get to its 10-day moving average, and exacerbated by a
failure of the 170 cents-a-pound mark which had been seen as a likely chart
Fundamentally, the market was not helped by the move late on
Friday by Kraft, owner of brands such as Maxwell House, to raise retail prices
on most coffee products by some 10%, following a similar move by rival Smucker
Higher prices are likely to quell demand.
Still, the International Coffee Organization reminded that
it ain't all over until the Brazilian harvest results are in, ending the huge
uncertainty over how much the country's crop sustained from drought early this
"The prevailing uncertainty surrounding the damage to the
Brazilian crop presently being harvested will last for at least another month,
and with it the higher than usual [price] volatility," the ICO said.
The organisation itself, "until more information is
available", stuck by an estimate for Brazilian production of 44.6m bags, in
line with that of the country's official Conab bureau.
Go slow on sales
London robusta coffee
fell a more modest 1.3% to $1,883 a tonne for July delivery, amid concerns over
weather in Vietnam, the top producer of this variety, and over ideas of a
reluctance among producers to sell.
Coffee merchant Volcafe said that Vietnamese prices had gone
from a discount of some $40 a tonne to London futures to a premium of the same amount
in a week, as "producers and agents continue to halt sales into the declining
Meanwhile, in Indonesia, the third biggest robusta producer,
"farmers continue drying and hold on to the coffee for Ramadan and Hari Raya".
Corn futures drop
In grain markets, corn
was a notable loser, tumbling 1.7% to $4.51 a bushel in Chicago for July
delivery and by the same to $4.50 a bushel for the new crop December lot.
There was one hope of support for prices in decent US exports
last week, as measured by cargo inspections, at 1.15m tonnes, up from 980,000
tonnes the week before, and ahead of expectations.
But that was one of the few straws that bulls could clutch
at, with bears holding a series of cards including the potential for an export downgrade
when the US Department of Agriculture on Wednesday reveals its latest monthly
Wasde crop report.
A soft US export performance in mid-May has prompted ideas
of a downgrade to the forecasts for US exports in 2013-14.
And export ideas were hardly improved by talk that China has
barred imports of US distillers' grains (DDGs), the feed ingredient
manufactured as a byproduct of corn ethanol output, for fears over
contamination with Syngenta's MIR-162 variety.
MIR-162 corn, a genetically modified variety, has been
approved in Washington but not in Beijing, and claims of traces of the strain
have led to a series of rejections of US corn cargoes, with less concerns until
now over DDGs.
Meanwhile, ideas of new crop exports are a little lukewarm.
"There continues to be a lot of talk in the industry that
the US offers to sell corn overseas in the fourth quarter of 2014 and first
quarter of 2015 are not getting much response as buyers have filled up inventory,"
Darrell Holaday at Country Futures said.
And for what demand there is, importers "are much more
interested in offers from South America or the Black Sea region".
All this is before getting to the production side, and the
passing of forecast of a mid-June hot and dry spell which helped buoy prices in
the last session.
As an extra boost to US crop prospects, the USDA is expected
later on Monday to lift by some 3-4 points, to 79-80%, its estimate of the corn
rated "good" or "excellent" – an unusually high reading.
"South Dakota crops look great, while North Dakota corn is
rated well above average following prompt and uniform germination," said
Richard Feltes at broker RJ O'Brien.
One scout in the north eastern Midwest "characterises corn
prospects as 'phenomenal'".
'A lot of spread
Corn's fall actually provided a benefit for soybeans, with plenty of short
corn-long soybean bets going on – or being reversed.
"There is a lot of spread trading between corn and soybeans,"
said Darrell Holaday at Country Futures.
"Corn was making new lows when the soybean rally occurred,
but when the soybeans broke from their highs, the corn came off of its lows."
And, as an extra support, weekly US exports were strong, at
OK, that was down from the 118,254 tonnes the week before,
but enough to take the US total so far in 2013-14 to 42.2m tonnes.
That is not far short of the 43.55m tonnes the USDA has
forecast for the whole season, with some three months still to go.
Still, one big negative was that the USDA is expected later
on Monday to reveal a strong rating for the condition of the US crop, of perhaps
70% good or excellent, compared with 64% last year.
"The market seems overwhelmingly confident that those should
be better than average for this time of year," CHS Hedging said.
At Citigroup, Sterling Smith added that "weather continues
to be a large negative for new crop and any strength there should see hedge
pressure contain the upside".
Still, new crop November soybeans actually did better than
old the crop July contract, gaining 0.5% to $12.24 ¼ a bushel, helped by
spreading with corn.
The July lot closed unchanged at $14.57 a bushel.
'Concern over crop
Where weak corn was not helpful was in fellow grain wheat, offsetting the impact of lingering
concerns over harvest rains impairing the quality of the southern US Plains hard
red winter wheat crop currently being harvested.
"US hard red winter wheat country will receive periods of
rain through the next full week with central and northern areas wettest," World
"Additional concern over crop quality may occur, although
rainfall will not be as heavy as that of the weekend."
Weekly US exports were OK, at 518,866 tonnes.
'Dryness relief expected'
But there was some easing in fears over dryness in Russia.
"Russia's dry region in the Volga River Basin will receive scattered
showers of light intensity multiple times this week," World Weather said.
"Dryness relief is expected, although it will be brief," and
a "general soaking of rain is still needed".
And, with pressure from corn, wheat for July fell 0.9% to
$6.12 ½ a bushel in Chicago for July delivery, although that did not reverse
all the gains of the last session.
Kansas City hard red winter wheat for July eased a modest
0.5 cents to $7.35 a bushel.