Coffee and sugar retained their appeal to
investors. But grains and soybeans sure struggled.
Arabica coffee soared 3.3% to 203.40 cents a pound in New
York for May delivery, after earlier touching 206.85 cents a pound, the best
for a nearest-but-one contract since February 2012, amid ideas that rainfall over
the weekend in the Brazil coffee belt was less than generous, and with little
hope of much more for now.
Brazilian weather group Somar said that the weekend was
marked by "low cumulative rainfall and higher temperatures" in most
coffee-producing areas, while the departure of a cold front looked like meaning
"decreasing" rainfall ahead.
In the US, MDA said that "significantly dryness continues"
in central Minas Gerais, the top coffee-growing state, besides east central Sao
Paulo, the neighbouring state which is Brazil's top grower of sugar cane.
As an extra boost, data late on Friday revealed that hedge
funds had increased only by a small amount their net long position in arabica
coffee futures and options, by just 6 contracts to 27,872 lots, still well below
historic highs and signalling scope for further long positions.
Extreme net long positions question whether further buyers
remain to come in and prop up prices further.
In New York raw sugar,
there was some concern over a hike of nearly 43,000 contracts week on week in
the managed money net long, more than some investors had expected, and
"The increase… and rain arriving in Centre South Brazil
sugar areas over the weekend was enough to prompt some early selling this
morning on the opening in New York," Nick Penney, senior trader at Sucden Financial
But with the rainfall emerging as ungenerous, and the dry
outlook for some areas, raw sugar for May closed up 1.2% at 18.22 cents a pound,
albeit still below last week's highs.
(The managed money net long in raw sugar topped 200,000
contracts in October, by the way, suggesting plenty of scope for further buying
if funds further get the bullish bit between their teeth.)
Also among soft commodities, cotton managed a higher close, up 0.3% at 91.56 cents a pound for
May delivery, among the highest closing levels for a nearest-but-one contract
of the last two years.
The US Department of Agriculture, in its monthly Wasde crop
report, nudged higher by 320,000 bales to 96.8m bales its forecast for world
cotton stocks at the close of 2013-14, a reflection of dimmer hopes for Chinese
and Pakistani consumption.
"China's consumption is lowered 500,000 bales based on
increasing concentrations of domestic supply in the national reserve and continued
growth in cotton yarn imports," the USDA said.
"Pakistan's consumption also is lowered 500,000 bales, as
sluggish imports indicate lower use.
But the forecast for US stocks was cut by 200,000 bales to
2.8m bales, reflecting an improved hope for exports, and supportive for prices.
The Wasde might, on the face of it, have been expected to
have proved supportive for row crops, in cutting the estimates for US corn and soybean stocks at the close of 2013-14.
Corn stocks were downgraded to below market expectations,
and although the soybean figure was a touch above, it still represented the
tightest, compared with use, for 48 years.
But all the data appeared to do was turn a downbeat session
into something of a rout, with soybeans for May slumping 2.7% to $14.18 ¾ a
The contract fell temporarily below its 10-day moving
average for the first time in more than a month.
Already dialled in
One trouble was the high expectation for the report, in
terms of providing bullish news, sentiment evident in the large hedge fund bets
on higher prices.
"When you have run up as much as we have in all of these
markets, it is difficult for a [Wasde] report to provide the bullish numbers
needed to sustain strength," Darrell Holaday at Country Futures said.
However, there was also the problem of Chinese cancellations
of import orders which, even if not evident in orders from the US, are rumoured
to be affecting purchases from Brazil.
The tumble overnight in soybeans on China's Dalian exchange,
where the best-traded September contract settled down 2.3% at 4,367 remninbi a
tonne, added weight to such talk.
"China has reported
washed out of 18 cargoes of Brazilian soybeans, and is reportedly looking to wash
out of 20-25 more," Mr Holaday said.
"This is a problem for the soybean complex as it reflects
the backlog of soybeans in China."
Indeed, Chinese soybean crush margins have tumbled from a
positive $150 a tonne in October to a negative $30 a tonne or so, according to
Benson Quinn Commodities said that "it appears China may
have cancelled as many as 15 cargos. Chinese port supplies are ample, while
crush margins are negative."
US Commodities noted rumours of "10-15 vessels cancelled in
South America by China".
'More difficult to
It was noteworthy that orders of Brazilian, rather than US,
soybeans are being ditched.
"China bought a lot of US soybeans delivered (CIF), which
makes them much more difficult to cancel," Mr Holaday said.
The cancellations will have a knock on effect on the US in
freeing up supplies for other buyers, but Benson Quinn Commodities noted some
reason not to panic just yet.
"Brazilian basis levels weakened on the news, but the spread
between Brazilian and US values has not reached levels that would indicate the
pace of US imports from Brazil increasing," the broker said.
Corn vs soybeans
heavily too, by 2.2% to $4.78 ¼ a bushel, although not by quite enough to sacrifice
the contract its hard-won 200-day moving average, regained last week.
Besides the broader "buy the rumour, sell the fact" thinking,
the grain may tend to take more notice of soybeans for a while, given the
imminent spring planting period, in which the two crops compete strongly for
area (and with cotton a bit too).
This theme will come sharply into focus on March 31, with
the release of a key US report on prospective plantings.
The soybean: corn ratio, on a November: December futures
basis, actually closed at 2.46: 1, firmly encouraging plantings of the oilseed
'Great deal of risk
Wheat, while initially
resilient, lost ground too, ending down 2.0% at $6.40 ¾ a bushel in Chicago for
In fact, the Wasde produced few changes for wheat. And among
these changes was an upgrade to the forecast for Russian exports in 2013-14, by
1.0m tonnes to 17.5m tonnes, rather than showing any hint of concern at any
fallout on trade from the Ukraine crisis.
In fact, "a great deal of risk premium is now in the market
on the Russia/Ukraine situation" US Commodities said.
But without fresh signs of Ukraine unrest, investors were
reluctant to add any more.
In Paris, the May contract fell in sympathy, by 1.4% to E207.00
a tonne, despite an upgrade by the USDA to its estimate for European Union
exports, by 1.5m tonnes to a record 29.0m tonnes.