Bulls kept control of agricultural commodity markets on
Wednesday, but headway was not so easy to come by as in the last session.
…with one exception. Arabica
coffee futures soared again, adding 5.0% to 143.00 cents a pound in New
York for March delivery, the highest close for a spot contract in nearly nine
The bean has now added 26% in seven trading sessions, and
its latest spurt came as the International Coffee Organization pegged world output
for coffee overall in 2013-14 at 145.8m bags, below estimates from many other
(NB, the figure includes last year's, strong, Brazilian
coffee harvest, rather than the 2014 crop whose threat by dryness is central to
the jump in prices.)
If the ICO is correct, the build in world coffee supplies over
2013-14 will not be nearly as large as some believe.
Although the intergovernmental organisation has yet to
reveal a demand estimate, applying the average annual growth rate of 2.4% to
last season's 142.0m bags of coffee consumption gets a figure of 145.4m bags.
That means a deficit of just 400,000 bags.
And this when the Brazil weather outlook appears to hold
little chance of rain relief for central, coffee-growing areas.
"The long-range forecast for South America is unchanged this
week and remains warm in central and southern Brazil through February before
cooling a bit in March," said Don Keeney at weather service MDA.
"Precipitation should remain below normal this month in
central and north eastern Brazil, while the pattern should shift into southern
and western Brazil in March."
Local forecaster Somar also forecast dryness in Brazil's
coffee belt for the next two weeks.
While robusta coffee, of which Vietnam is the top producer,
is less affected by Brazil's woes, the beans were dragged 2.6% higher in London
to close at $1,857 a tonne for March delivery.
'Heat is threatening
Brazil's dryness is a concern for producers of row crops
too, of course – and not necessarily a negative one, with the weather helping speed
harvest in areas with more advanced crops.
Unfortunately for growers, the dryness is not extending too
far into Mato Grosso, the top soybean producing state.
"Heat is threatening soybeans in southern Brazil and
persistent rains are slowing harvest in Mato Grosso," Anne Frick at Jefferies Bache
This is an issue for corn
too, with heat a big yield threat for the grain when in pollination, while the
slow soybean harvest may, as Ms Frick said, "interfere with planting the safrinha
crop", planted as a follow-on on land cleared by the combines.
Corn is the most popular safrinha crop, although "soybeans
have been expected to take acreage from corn this year", thanks to price
Farmer selling picks
That does not meant at all that all the news was price
negative with higher prices, for instance, encouraging selling by farmers who
have been reluctant to sell at prices below those they have got used to in the last
couple of years.
"With better producer selling in corn seen over the course
of the past week basis levels have begun to edge lower," Benson Quinn
Farmers in Brazil as well as the US are believed to be
selling – although not Argentine growers holding crops as a hedge against a
"After two days of higher trade, we could see South American
farmer pricing keep a lid on additional gains," CHS Hedging said earlier in the
Meanwhile, Lanworth nudged higher forecasts for corn and
soybean crops in Argentina, to 24.7m tonnes and 55.6m tonnes respectively, noting
that hot and dry conditions "had abated".
In Brazil, the harvest forecast for corn was also raised
slightly to 70.7m tonnes, for soybeans to 90.7m tonnes.
And on the demand side, there is talk of Chinese growers
departing lunar new year celebrations to buy Brazilian soybeans, which Oil
World warns represent a big threat to high prices.
Indeed, soybean prices have "significant" potential for
decline as Brazil executes an export programme which this month sis expected to
hit 2.5m tonnes, bringing shipments for the first two weeks of 2012 to a record
2.8m tonnes, German-based consultancy Oil World said.
'A little on the
Already there was evidence of South American competition biting
at the rally in Chicago soymeal,
which for March nudged 0.1% lower to $442.00 a short ton.
"Spot soymeal values have moved up to a level that is at a
major premium to soymeal out of Brazil, which could easily prompt some US
imports," Darrell Holaday at Country Futures said.
"That has kept soymeal a little on the defensive today."
Still, soybeans closed up 0.2% at $13.16 ¼ a bushel, also getting
some support from technical factors, after its bust through the key
$13.00-a-bushel level in the last session.
March corn had technical support to rely on too, after
closing above its 100-day moving average in the last session for the first time
The contract managed a second time on Wednesday, in adding
0.4% to $4.43 ¼ a bushel.
The grain gained an extra fillip from the US announcement of
an export sales of 236,728 tonnes of corn to an "unknown" importer, all but 50,800
tonnes for the current marketing year.
That played to ideas of strong export demand, at a time when
cold is slowing access of corn to US ports.
Ethanol data was more mixed.
While this showed a decline of 5,000 barrels a day in output
last week, to 895,000 barrels a day, this was at a time of cold weather upsets
And demand for the biofuel was evident in a drop of 193,000
barrels to 16.74m barrels in US inventories.
Still, as a reminder that bulls do not have the game all
their own way, December corn fell 0.5% to $4.57 a bushel in Chicago, with the
US weather upsets helping focus buying nearer- term.
'Found some midday
managed more consistent gains across the futures curve, although nothing like
on the scale of the near-4% rise in the last session.
In fact, "wheat was lower early, but has found some midday
support with funds covering a large number of short futures after the condition
report released on Monday", Mr Holaday noted, referring to the data showing a
decline in the condition of the US hard red winter wheat crop.
Concerns over some winterkill in Ukraine too, and the
potential threat of an El Nino to Australia's crop, which has yet even to be sown,
applied a little extra persuasion to speculators to close a few more of their
huge short positions in Chicago wheat.
"The wheat complex is still feeding off of short covering
and technical support," CHS said.
In fact, Chicago soft red winter wheat gained 0.5% to $5.87 ½
a bushel for March, rebuilding some premium over corn, but not over hard red
winter wheat, as traded in Kansas City.
There, the March contract added 0.7% to $6.46 ½ a bushel,
nearly touching its 50-day moving average at one point, for the first time in
Minneapolis spring wheat gained 1.0% to $6.23 ½ a bushel,
encouraged by the less-huge-than-expected Canadian inventories revealed on Tuesday.
But Paris wheat for March eased 0.1% to E194.00 a tonne, depressed
by talk of increasing Russian competitiveness on export markets thanks to
weakness in the rouble.
London wheat for May closed up 0.3% at £155.75 a tonne.