PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:15 GMT, Thursday, 12th Jun 2014, by Agrimoney.com
Evening markets: cocoa, soy futures take turn under the cosh

This time, it was the turn of cocoa and soybeans to feel pressure from the reduced sentiment towards agricultural commodities.

Cocoa for September delivery touched the highest levels, for a nearest-but-one contract, in nearly three years in both London, at £1,964 a tonne, and New York, at $3,119 a tonne, only to end sharply lower.

The London contract closed down 1.4% at £1,930 a tonne, and its New York peer down 1.3% at $3,062 a tonne, amid supply pressure from what is turning out to be a decent mid-crop harvest in West Africa, with good weather boding well for future output there and elsewhere too.

'Outstanding weather'

Citigroup's Sterling Smith flagged a "run of outstanding weather".

At Price Futures Group, Jack Scoville said that "crop conditions are good in West Africa and generally good in South East Asia, as both regions are reporting frequent rains to support good production, but sporadic enough that harvesting is not seriously hurt.

"Production ideas have generally increased, and the International Cocoa Organization and some private analysts have been cutting deficit estimates for the year due to the strong [West Africa] mid-crop production."

Arrivals at ports in Ivory Coast, the top producing country, remain "strong, and reports from Nigeria indicate that Cocoa is readily available and of good to very good quality", Mr Scoville said.

'In a lot of trouble'

For soybeans, the problems were largely technical, with funds attempting to exit a large long position in the July contract before expiry driving prices through chart trigger points, and encouraging yet more selling.

There has been "major liquidation in the soybean sector today as the July soybean contract moved below $14.30 a bushel," Darrell Holaday at Country Futures said.

"This market is in a lot of trouble. Funds are very long and a close below $14.30 a bushel has and will prompt significant long liquidation."

The contract in fact closed down 2.1% at $14.15 a bushel in Chicago, its weakest since March, if managing to find support at its 100-day moving average, at a little under $14.10 a bushel.

CHS Hedging noted that open interest, ie the number of futures positions still alive, "in the July contract continues to deteriorate ahead of first notice day", on June 30, falling 18,800 lots in the last session.

'Up noticeably'

Not that everything fundamental was negative for the oilseed, with weekly US export sales for 2013-14 coming in at a positive 86,700 tonnes, "up noticeably from the previous week", the US Department of Agriculture said.

Negative figures are needed to meet the USDA forecast for the full season.

"The positive old-crop export sales for soybeans were supportive after their release," Anne Frick at Jefferies Bache said.

New crop sales of 403,300 tonnes were OK too, if still leaving the US well behind its pace of advance sales a year ago.

'Fresh demand'

Also, elsewhere in the oilseeds complex, palm oil rebounded 1.0% to 2,403 ringgit a tonne in Kuala Lumpur, if still remaining near eight-month lows, as "lower prices sparked some fresh demand into the market", Mr Smith said.

Still, the rise reduced palm oil's discount to rival soyoil to $113.49 a tonne, well below the one-year average of $142.21 a tonne, and helping soyoil itself add 0.4% to 38.58 cents a pound in Chicago for July delivery.

But soymeal had a torrid time, dropping 2.7% to $469.20 a short ton for July delivery, undermined by weak US export sales as well as by ideas of greater competition with distillers' grains in the US market now that China has suspended imports of the corn derivative, and high protein feed ingredient.

Spreads unwound

Still, the somewhat technical nature of Thursday's decline was also seen as illustrated by the relatively strong performance of new crop November soybeans, which closed down a more modest 0.9% at $12.12 a bushel.

The relatively slow decline was attributed to the unwinding of long July-short November spreads.

And soybean's decline may have provided some support to corn too, with long soybean-short corn bets have proved popular for much of the year.

However, support for the grain also came from the weather, and the return of ideas of hotter temperatures and drier conditions which, while far from threatening, encouraged the reinjection of a little risk premium.

'Significant change'

"The midday GFS model was significantly warmer and drier," Country Futures' Darrell Holaday said.

"This was a significant change." While still "indicating significant moisture in the Plains and Midwest early next week", the forecast has "pushed the weekend moisture south".

Corn export sales were a little soft for old crop, at 409,700 tonnes, "down 26% from the previous week and 17% from the prior four-week average," the USDA said.

New cop sales were a modest 105,500 tonnes.

Still, at least on ethanol demand, China suspension of US imports of DDGs "may change the economics for processors but they are still seeing positive margins despite lower DDG values".

Corn for July closed up 0.7% at $4.44 a bushel, while the new crop December lot added 0.5% to $4.43 a bushel.

'Large global supplies'

Corn's strength, however, could not carry through to Chicago wheat, which ended down 0.7% at $5.58 a bushel.

The results of the latest tender by Egypt's Gasc highlighted the uncompetitive nature still of US export supplies, which were offered at $255.74 a tonne, above Romanian and Ukrainian cargos even before adding in the extra cost of shipping across the Atlantic.

The USDA's Wasde report on Wednesday, highlighting stronger global crop prospects, in the likes of Russia, Germany and Ukraine, also continued to weigh.

"The large global supplies and the potentially week row crop action any upside for the wheat is very limited," Citigroup's Sterling Smith said.

'Damage to production'

Among soft commodities, arabica coffee did better at hanging on to newly-rediscovered forward progress, adding 0.2% to 171.95 cents a pound in New York for July delivery, ending back above its 10-day moving average.

The market has been supported by ideas that, relatively, upbeat Brazil crop estimates released a couple of weeks ago may have been a little optimistic.

"Continued reports of damage to production are continuing to support the market as the great debate to the size of the crop continues to rage," Mr Smith said, raising the potential for a further downgrade to Citigroup's own forecast.

"We are currently comfortable with our estimate of 44.25m bags for the time being. However the reports from on the ground may allow for another downward revision."

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