Agricultural commodities returned to funds' good books on
Monday, with quite some effect.
Even arabica coffee,
well out of sorts last week, which showed the biggest weekly loss since 1999,
managed a bounce.
New York's May contract soared 3.1% to 176.40 cents per
pound, nearly 10 cents above its intraday low, well into negative territory, as
investors wondered whether last week's 13% tumble, on rains in drought-hit
Brazil, was an overreaction, given that a stack of damage has already been done.
Some commentators feel that the rain has done more to help
next year's Brazilian crop than this one, given that 2015 cherries will be
borne on vegetation grown this year, and which has still some time to recover before
flowering, around September.
Although the Colombian Coffee Federation at the weekend
lifted its forecast for the Colombian coffee crop to 11.4m bags, up 500,000
bags year on year, that only represented an upgrade of 100,000 bags.
'Headlines of rains'
Raw sugar managed
only a small bounce, of 0.01 cents to 16.84 cents a pound in New York for May delivery,
although this minimal gain was enough to put the contract to the topside of its
100-day moving average, which it closed the last session exactly on.
In fact, rains in Brazil may have some positive implications
for sugar prices, in causing logistical upsets at the start of the 2014-15 cane
"We have headlines of rains predicted for Brazil in April
and we must not forget in recent years rains around the start of the Brazil
season have helped cause incredible front month switch volatility, as the rains
hampered harvest/logistics/shipping line-ups," Sucden Financial said.
Marex Spectron confirmed that while "this week is expected
to be one of patchy rains, there are some forecasters talking about heavy rains
in May-June when the harvest will be getting into full swing".
'Fund money streaming
Still, grains especially proved appealing to funds on Monday,
when Chicago wheat for May closed up
3.1% at $7.14 ½ a bushel.
Kansas City hard red winter wheat for May managed a slightly
smaller gain, of 2.9%, but in ending at $7.93 ¼ a bushel managed the highest
close for a spot contract in 10 months.
"Fund money has come streaming into the grain markets again
today," Darrell Holaday at Country Futures said.
There was some disagreement over whether US dryness or
Ukraine concerns were the bigger force behind the rally, with jitters growing
over the condition of US winter wheat seedlings, and more (incomplete) US
Department of Agriculture crop condition data due out later on Monday.
"The GFS model over the weekend became significantly drier
in the southern Plains for next week. That has prompted a lot wheat buying," Mr
Broker Benson Quinn Commodities said that "the moisture
situation in the southern Plains continues to offer support to wheat markets
that have a tendency to get overbought.
"Current weather models offer limited moisture and warmer
temperatures than those forecasted last week."
"The dryness in the southern Plains is certainly giving some
support," Don Roose, president of US Commodities said.
'Tension in Ukraine'
However, "the Black Sea situation is at the back of people's
minds", Mr Roose added.
Mr Holaday reckoned that "the tension in Ukraine is probably
causing most of the buying today," highlighting moves to remove Russia from the
G8 group of leading industrialised nations.
"The concern is that this may antagonise Vladimir Putin, the
Russian president, who has armed troops on the amassed along the Ukrainian
Besides, there is the threat to Ukraine exports not just
from Russia's annexation of Crimea, but its control of waterways to one major port
and one significant one in the east of the Ukraine, as SovEcon pointed out.
That may cause a "bottleneck" at the remaining ports, in the
west of Ukraine, where, for instance, Odessa is situated.
And SovEcon also flagged rising Russian wheat prices too,
reducing their competitiveness, which was placed somewhat into question last
week at the latest tender by Egypt's Gasc grain authority.
'Need some rain'
The tone from other countries where weather is a concern was
Rains are refreshing dry areas of eastern Australia, just
ahead of sowings.
In the European Union, the European Commission's Mars
agricultural division cautioned that the "Czech Republic, south eastern
Germany, Bulgaria, Ukraine and Turkey experienced one of the driest winter
seasons on record.
"These regions will now need some rain to ensure that soil
moisture levels are not depleted too quickly as the water requirements of
winter crops increase, and to ensure the emergence of spring crops."
However, Mars estimated the EU soft wheat yield at 5.71 tonnes
per hectare this year, down from last year's 5.82 tonnes per hectare, but above
the average of at 5.57 tonnes per hectare.
One barrier to
Indeed, Macquarie was ambivalent about the prospects of the wheat
rally continuing, citing that in terms of the weather premium at least, enough
seemed to be baked into prices right now.
And Paris wheat, while rising, was relatively modest in its
gains, adding 1.4% to E210.75 a tonne for May delivery.
London wheat for May added 0.9% to £169.75 a tonne, the
highest close for a spot contract in eight months, while the better traded
November contract gained 1.0% to £161.55 a tonne, but still not impressing all
"The London November wheat contract did break through the
£160-a-tonne barrier" last week, "but only seems to have established another level
of resistance a couple of pounds higher," traders at a major European
commodities house said.
Back in Chicago, corn
rose too, jumping 2.4% to $4.90 a bushel for May delivery, a six-month closing
high for a spot contract, in part helped by fellow grain wheat, but with its
own merits kicking in too.
"Weekly US export inspections satisfied expectations with
corn reported a marketing-year high of 45m bushels," CHS Hedging said, a figure
which took the sting out of negative talk that China has rejected another US
cargo thanks to traces of an genetically modified variety unapproved in Beijing.
Ukraine is of course a big exporter of corn, the third
And US weather is increasingly an issue for corn too, with
the sowing window opening in southern areas, but ground still cold further
As an extra support, ethanol
prices soared, rising 4.9% to $2.988 a gallon in Chicago, for April delivery,
and earlier hitting $3.024 a gallon, the highest for a spot contract since July
Prices of the biofuel have been helped by weak US inventory levels.
headed for the US'
Soybeans for May rose
too, by 1.2% to $14.25 ½ a bushel, overcoming talk of US imports from South
America on the agenda, an indication of the altitude of US prices.
"The first cargo of Brazilian soybeans headed for the US
left Brazil this weekend. The question is how many will there be in the total,"
Darrell Holaday said.
US Commodities said that "the first Brazil soybean vessel is
on its way to the US.
"Rumours have 10-12 more to follow," not surprising given
that "Brazil soybeans are $1.33 a bushel cheaper than US soybeans port to port".
'Tough situation to
However, one factor in their favour was chatter that a
meeting of Chinese soybean processors at the weekend decided to stand by import
commitments, eroding a big question mark over orders from the US, which many
have considered are in for a stack of cancellations.
"There has been talk that some Chinese crushers are
downplaying the idea of defaulting on US soybean purchases," Benson Quinn Commodities
"This is a tough situation to handicap, but rumours of this
likely offered support" to prices.
At RJ O'Brien, Richard Feltes highlighted "trade talk that Chinese
soy crushers at a weekend meeting agreed to honour their existing soy purchase
Besides, Feng Yonghui, general manager of Beijing-based Soozhu.com,
said that an oversupply of hogs in China, big eaters of soymeal, may continue
because some farmers in the biggest pork producing nation have been slow to
reduce their herds.
'All key states
Corn and soybean pits are also looking at each other a bit
closer at this time of year, given the forthcoming US "battle for acres", with
the two crops competitors in spring sowings plans.
Informa Economics is expected on Tuesday to revise its
estimates for US sowings, and Farm Futures has pegged soybean sowings at a
record 82.93m acres, with corn area seen at 92.06m acres.
"All key states showed increases [in prospective soybean
area], with some of the biggest shifts possible in Illinois, where farmers
pushed corn-on-corn in recent years to capture profits from the ethanol boom,"
the magazine said.
Official data are due on Monday.