Anyone for tea?
Coffee is certainly
becoming an increasingly expensive alternative for consumers, soaring 9.1% in New
York on Wednesday, for May delivery, to take its gains for 2014 to 79%.
(Single shots all round?)
The close of 202.40 cents a pound for the May arabica coffee
contract was the first close for a nearest-but-one contract above 200 cents a
pound for exactly two years.
Damage estimates grow
The rise came amid a continued decline in estimates for the
Brazilian harvest this year, with importer Wolthers Douque pegging it at 47.7m
bags "at best" because of drought in the country's coffee belt.
(Before the drought, estimates for the harvest were at 60m
bags, or thereabouts, and many commentators have been sticking with figures
above 50m bags.)
And US-based Wolthers Douque came up with one of the first
figures for next season too – 40m-42m bags –as the stunted growth of branches
which will flower around September, and bear next year's coffee cherries, reduces
prospects for that harvest too.
Rain, but how much?
This when damage from dryness may not be over yet.
Although weather service MDA did forecast rains this weekend
in parts of Brazil including south western Minas Gerais, Brazil's top coffee
growing state, "it is unclear if the showers will do much good", Jack Scoville
at Price Futures Group said.
Besides, MDA, in a longer-term forecast, predicted that "below
normal precipitation" will continue in parts of Brazil including Minas Gerais
As an extra help to bulls, they faced less pressure from producer
sales, with Brazil in carnival mode and "producers in other countries are not
actively selling", Mr Scoville said.
Robusta coffee underperforms
This includes in Vietnam, the top grower of robusta beans, from where exports so
far this year "have been disappointing", he said.
"Wire reports suggest that offers from Vietnam have been
better to start this month as well. The market needs that coffee to be exported
to help fill the vacuum left by the poor production in Brazil."
In fact, it was signal that robusta coffee indeed
underperformed its peer, falling 0.6% to $2,065 a tonne in London for May
Will arabica follow suit on Thursday, when Brazilian offices
reopen after Carnival?
Four month high
The same goes for raw
sugar, which soared 2.8% to 18.23 cents a pound in New York for May
delivery, the best close for a spot contract in four months.
Again the sweetener has been helped by Brazilian drought
As was orange juice,
which built on 4% gains in the last session, closing up 1.5% at 153.20 cents a
pound for May delivery, the best close for a nearest-but-one contract since
Juice is also being supported by fears over levels of greening
disease, a debilitating bacterial infection of citrus trees.
There was no way grains were going to match these kinds of
gains, with concerns over the Ukraine crisis somewhat in retreat, thanks to
talks between US and Russian foreign ministers in Paris.
While shares had
a weak day, that was attributed to some soft US data, with ADP, a private US
payroll processor, estimating at 139,000 the number of jobs created last month,
below market expectations.
Separately, the Institute of Supply Management's index of
non-manufacturing activity fell to a four-year low of 51.6 last month, from
54.0 in January.
which was sent soaring on Monday by concerns over Russian oil supplies, dropped
1.4% below $108 a barrel.
Still, grains did better than that, with some residual concerns around about the impact of Ukraine's turmoil on exports, as farmers
hoard crops as a hedge against a falling hryvnia, and on spring sowings, if
farmers can't get the liquidity to pay for seed and fertilizer.
Furthermore, dryness is adding to Ukraine farmers' woes,
with Lanworth cutting its forecast for the country's wheat harvest this year, citing rains 50-55% below normal last
And in the dryness remains a problem too for winter wheat
Richard Feltes at RJ O'Brien highlighted forecast for "only
light precipitation across the central Plains over next week, while Texas and
Oklahoma stay dry," and Commodity Weather Group is forecast further dry weather
for the hard red winter wheat belt in the second half of March.
Ethanol output falls
OK the news for grains was not all so positive, with the
European Commission underlining decent prospects for the European Union harvest, the world's biggest.
Meanwhile, corn ethanol production data was weak, down
11,000 barrels a day to 894,000 barrels a day, although there were some
generous interpretations around about that, with US cold seen disrupting biofuel
(Signally, US ethanol stocks fell too, by 413,000 barrels to
16.61m barrels, indicating that consumption is higher than output, and not at a
strong time of year for ethanol demand either.)
Furthermore, investors are expecting the US Department of Agriculture
to lift slightly, by 7m bushels to 1.488bn bushels, its estimate for domestic
corn stocks at the close of 2013-14, when monthly Wasde crop report is unveiled
Still, one help for agricultural commodities across the
piste is that they are back in favour with funds.
Mr Feltes noted that given "uncertainty" ahead of much-anticipated
USDA stocks report at the end of the month, US sowings ahead, and a "possible
shift in Black Sea demand to other origins, new fund longs have the wind at
their back until developments prove otherwise".
Certainly wheat for May ended down only a modest 0.2% at
$6.42 ½ a bushel in Chicago, ending above its 100-day moving average for a
second successive session, for the first time since October.
Kansas City-traded hard red winter wheat for May eased only
1 cent to $7.08 ½ a bushel, being grown in the US Plains, with its dryness
concerns, although that saw it fall just short of its 200-day moving average,
for a second session.
In Paris, wheat for May managed gains, up E207.75 a tonne, helped
by ideas of a reluctance among buyers to purchase from Ukraine.
Back in Chicago, corn for May dropped 0.4% to $4.84 ¼ a
It looked doubtful that soybeans
would even manage to match that after the USDA revealed that Chinese buyers had
cancelled orders totalling 245,000 tonnes of US soybeans, fulfilling long-held
But is this enough to make a difference to an
already-squeezed US soybean balance sheet?
"It's a good start, but we'll need more," Mr Feltes said.
In fact, traders expect the USDA in the Wasde to cut its
estimate for domestic soybean stocks at the close of 2013-14 by 9m bushels to a
wafer-thin 141m bushels.
And, with hopes for South American crops on the wane, soybeans
for May ended down only 0.2% at $14.20 ½ a bushel.