PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 18:44 GMT, Friday, 7th Feb 2014, by James Moore
Evening markets: coffee futures probe highs, but oats tumble

Markets met with a volatile day Friday as Chinese players return from their week long New Year holiday while key economic data from the US disappointed, showing fewer jobs were created than forecast last month.

Despite initial bearish reaction by equities market finished higher as the data showed the US continues to create jobs.  There was also a degree of discounting of the data due to the winter weather conditions.

The Dow Jones Industrial Average stood up 0.8% near the close with the S&P500 up a similar 0.9%.

The dollar meanwhile finished somewhat mixed in reaction to the jobs data from the US, down 0.2% against the euro while up against the Japanese Yen.

The stronger euro helped lift the more industrial commodities, as did the return of Chinese players.  Three-month copper benchmark stood up 0.4% in late trade with spot gold up 0.6%.

Oats prices correct

Oat prices were again at the forefront of prices moves Friday, however in contrast to Thursdays 3% gain, prices met with heavy profit taking.

March futures stood down 4.4% in late trade at $4.36  a bushel, a far cry from the prior days record $4.63 a bushel.

Despite this oat prices remained in a rare premium to corn, which is reached yesterday for the first time in 12 years.

Despite the correction oats are set to gain 6.8% on the week, driven by the threat of a railroad workers' strike in Canada, which is already struggling with its logistics, and in delivering south the supplies that US oat consumers rely on.

Oats have seen strong gains so far this year with prices up some 24.6% basis todays close.

But, the "oat price surge is about logistics- not supply," said Richard Feltes at broker RJ O'Brien.

'No rains'

Coffee proved the other big mover of the day with arabica futures for March up as much as 5.1% at one point, amid ongoing dryness in Brazil. 

"The weather there has produced ideas of less production for this year and maybe next year as trees get stressed," states Jack Scoville, vice-president at the Price Futures Group, adding tjat "no rains are in the forecast for the next week or so".

In Brazil rainfall amounts over the last 30 days reflect the previous cycle which is quite wet over much of east central and Central Brazil, suggest forecaster at WxRisk. 

"The problem with these numbers in that it is somewhat deceiving since the weather pattern has change significantly over South America since the middle of January."

'Super-warm ocean temperatures'

Forecasters attribute the current weather pattern to a "bubble of extremely warm sea surface temperature anomalies in the southwest portions of the Southern Atlantic Ocean". 

"This large pool of super-warm ocean temperatures is driving the South America weather pattern," weather service WXRisk said.

Dryness in Brazil has been fuelling solid gains in coffee price, which reached as high as 144.15 cents a pound this week. 

March futures met with heavy long liquidation towards the close to end down 0.1% on the day at 135.65 cents a pound, but still marks an increase of over 12% on the week.

"Prices seem to have found tentative support towards 137.00 but further declines could see an extension of losses towards 130 and below," suggests Kash Kamal, research analyst at Sucden Financial.

"On the upside, a recovery of gains towards 145.00 could set the stage for a rally towards the 76.4% Fibonacci level at 147.28 before targeting 150.00," added Kamal, suggest the May high towards 160.00 could be targeted.

'Goldman roll'

Soybeans met with initial end of week profit taking Friday before edging higher towards the close. 

March futures settled at $13.31 a bushel having reached a best of $13.34 Thursday, its highest since December 23.

Another potential factor is the start of position rolls in the Standard & Poor's GSCI Index.

"The Goldman roll, starting today and continuing through next Thursday, may be pressuring March contracts in corn and soybeans," said Richard Feltes at RJ O'Brien.

There was also a degree of caution amongst soybean players ahead of Mondays Wasde report, the benchmark US Department of Agriculture crop briefing series.

"It could show the tightest balance sheet in history" for US soybeans, said Don Roose, president of Iowa-based broker US Commodities.

"While there is usually no change in the USDA's estimate of the U.S. soybean balance in the February report, we think the high pace of exports to date may cause an upward revision of 20m bushel to 1,515m bushel," suggests Anne Frick, senior oilseed analyst at Jefferies Bache.

Ms Frick also noted the latest soybean crop estimates due Tuesday by Brazil's national supply company Conab.

'Corn cancellations'

Despite pockets of index rolls, corn remained supported by the idea that the USDA will on Monday, in its monthly Wasde report, raise its forecast for US corn exports in 2013-14, and trim the end-stocks number.

"US corn export sales last week were very strong, supporting sentiment in the pit," noted Luke Mathews at Commonwealth Bank of Australia. 

Mr Feltes was keen to point out the potential for order cancellation by China.

"Be mindful that China still has 1.8m tonnes of outstanding/unshipped US corn on the books and that China has posted US corn cancellations in various quantities in each of last 8 weeks".

The "point here is that while short term indicators suggest further gains, intermediate term upside ahead of 2014 US growing season is limited without more evidence of better than expected old crop US corn export demand," Mr Feltes added.

March corn stood up 0.3% at the close at $4.44 a bushel.

Wheat 'risk premium'

Wheat meanwhile continued to be underpinned by weather concerns, despite some signs of improving after heavy rainfall hit California, Oregon and Washington.

"Farmers, livestock producers and municipalities are delighted with the wet forecast as water  supplies had been stretched to the limit by severe drought," said Martell Crop Projections.

March wheat stood down 0.6% at 5.77 a bushel at the end of the Chicago trading day having run into long liquidation.

Despite this commentators expressed caution.

"I suspect the wheat market, against a backdrop of unusually cold winter temperatures and below-average winter precipitation across the Plains, will readily carry added risk premium until the 2014 US crop breaks dormancy," Mr Feltes said.

"Drought has expanded into the US breadbasket - the hard red winter wheat belt," said Martell Crop Projections.

Morning markets: China return lifts markets
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