PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:51 GMT, Tuesday, 26th Aug 2014, by Agrimoney.com
Evening markets: Brazil worries send coffee, sugar soaring

There were bulls around in agricultural commodity markets on Tuesday, but you had to travel well beyond Chicago to find them.

New York soft commodities showed healthy advances, with arabica coffee soaring 5.2% to 197.45 cents a pound for December delivery, the contract's best close but one in three months.

The jump, which also took the lot healthily back above its 10-day, 20-day and 100-day moving averages, reflected a forecast by Neumann Kaffe Gruppe, the German coffee trader, which underlined that Brazil's production will remain depressed next year.

Long hangover

The group pegged Brazil's 2015-16 harvest at 45m bags, down 2.7m bags from its previous estimate, besides the 49.2m bag-harvest last year, on Conab estimates.

(Brazil's cycle of higher and lower production years makes 2013 the most appropriate comparison for 2015.)

Many commentators have cautioned that factors such as weak tree growth beans are borne on vegetation produced the year before and a trouble start to blossoming mean that the hangover from this year's drought will stretch meaningfully into next season.

Robusta coffee, of which Vietnam is the top producer, was helped 1.5% higher to $2,027 a tonne in London, for November delivery, retaking its 50-day and 75-day moving averages.

'Prices too low'

Also in New York, raw sugar for October showed strong headway, rebounding 2.3% to 15.71 cents a pound.

Early in the day, Commerzbank issued an upbeat price forecast, predicting a rise in prices to 17 cents a pound by the end of 2014.

"In view of the noticeably dwindling dynamism of the Brazilian sugar cane harvest and signs that the supply surpluses are coming to an end, we believe the 10% price fall within the last four weeks to be excessive and view the current price level as too low," the bank said.

And the bank was given immediate gratification after Unica, the Brazilian cane industry group, cut its forecast for the cane harvest in Brazil's key Centre South area to 546m tonnes, from a previous estimate of 580m tonnes.

The estimate for the region's sugar output was cut by more than 1.1m tonnes to 31.4m tonnes.

The downgrade, when futures were already near seven-month lows, more than offset the impact of a gloomy price forecast from the International Sugar Organization.

Late in the day, the market also heard that the US has slapped anti-subsidy import duties on Mexican sugar, although any impact on futures looks unclear.

'Adversely affecting harvesting'

Also outside Chicago, canola for November nudged 0.7% higher to Can$423.40 a tonne in Winnipeg, while Paris rapeseed ended 0.9% up at E324.25 a tonne.

Oil World, even while raising by 2,2m tonnes to 507.2m tonnes its forecast for world oilseeds production in 2014-15, flagged the 1.0m-tonne drop to 68.7m tonnes expected for rapeseed/canola.

And Standard Chartered said that "the outlook for Canada's canola production is of particular concern," with wet weather on the Prairies "adversely affecting harvesting and crop quality.

"Production shortfalls in Canada are likely to dampen China's vibrant canola imports from Canada, which rose more than 40% year on year in the first half of 2014."

Alberta also saw some frost at the weekend, deemed to have caused a little crop damage.

'Air out of the balloon'

However, the strength did not carryover elsewhere in the oilseeds complex to Chicago soybeans, which dropped, if with losses focused on the close-to-expiry, old crop September contract, which was undermined by a reversal in the US cash market which sent prices soaring last week.

"The air has completely come out of that balloon," Darrell Holaday at Country Futures said.

At RJ O'Brien, Richard Feltes said that the "collapse" in September soybeans, and soymeal, which dropped 4.3% to $388.70 a short ton, was being fuelled by a "modest pick-up in old crop soybean sales, a lower CIF [export] soybean market, and an early harvest push by southern growers anxious to capture record high inverse".

(Ie, to exploit the relatively high old crop prices, compared with new crop values.)

'Major liquidation'

In fact, new crop November soybeans eased only a 0.1% to $10.28 a bushel, albeit a fresh contract closing low, despite expectations for further decent growing weather, and no signs of crop-damaging frost as yet for the Midwest.

"Long-range weather forecasts have no frost, little warmer temperatures and plenty of moisture to finish out the row crops," Allendale said.

However, the contract did get a little bit of technical support from the sell-off in the September lot.

"There is major liquidation in the long September-short November spreads after the major top in that spread yesterday," Mr Holaday said.

Yield upgrade

For corn, the decent US weather outlook was a negative too, especially at a time when the US crop is in fine health.

The US Department of Agriculture overnight lifted its rating on domestic corn to 73% deemed "good" or "excellent", the highest figure for the time of year since at least 1993.

Influential crop scout Michael Cordonnier raised his estimate for the US corn yield by 1 bushel per acre to 170 bushels per acre (nudging higher his forecast for the soybean yield too, by 0.5 bushels per acre to 45.5 bushels per acre).

December corn dropped 0.7% to $3.65 a bushel, with many expecting a new lurch lower in prices to a harvest low around October.

'Harvest-delaying rains'

Wheat did better, helped by the continuing concerns over the impact on US harvest progress of the moisture helping soybean and corn development.

"Harvest-delaying rains may still affect the quality of the spring wheat crop, which is lending mild support to the market," CHS Hedging said.

Rains are, after all, helping prepare seedbeds for winter wheat plantings.

It was difficult, from a US perspective, to read too much into the results of an Egyptian tender, with US supplies not offered.

Key talks

An extra consideration for the wheat market, which is difficult to read for now, is a meeting between Russian President Vladimir Putin and his Ukrainian counterpart, Petro Poroshenko.

Wheat prices have moved largely in line with Russia-Ukraine tensions, given that both countries are major exporters of the grain.

For now, Chicago wheat, the speculators' favourite, added 0.4% to $5.56 a bushel, but other contracts fell.

Kansas City hard red winter wheat fell 0.4% to $6.30 a bushel, falling below its 10-day moving average, while Paris wheat for November dropped 0.4% to E172.75 a tonne.

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