Bears made headway again on Friday, this time biting a chunk
out of the soy complex.
Sure, they made an impression again in the arabica coffee market, driving prices
of New York's May contract down 1.7% to 171.15 cents a pound for May delivery,
taking the week's loss to 13%, the worst weekly performance by a spot contract
"Weather continues dictating the price trend, and the approach
of more widespread rains over south eastern Brazil presses futures prices," the
Conselho Nacional do Café producers' group said, if adding that the country's "Indian
summer has already caused irreversible damage in many coffee plantations".
"Until the release of consistent data on crop losses" in
Brazil's coffee belt, hit by drought since late December, "the market should
And selling was also evident again in sugar, for much the same reasons, as the rains in Brazil's main cane
state, Sao Paulo, next to the top coffee state of Minas Gerais, ease concerns
over the drop in production.
Sure, Rabobank cut its forecast for the Brazil Centre South
(mainly Sao Paulo) cane crop to 570m tonnes, but that ground has already been
trodden by Copersucar, the huge sugar co-operative.
And sugar futures are fighting history too, in having fallen
in each of the last seven months of March.
"The sugar market has entered a short-term bear market over
the past fortnight," Luke Mathews at Commonwealth Bank of Australia said, highlighting
the technical level of the 100-day moving average, which ended the day at 16.83
cents a pound.
"If this support is breached it would appear that the sugar
market will live up to its typical seasonality in which prices decline in
March, April and May," Mr Mathews said.
In fact, the May contract closed exactly on the line, at 16.83
cents a pound, down 1.2% for the day, if down a relatively modest 2.4% for the
'No longer flavour of the month'
But these sell-offs were overtaken on the day by those in
the soy complex, where soybeans for
May ended down 1.7% at $14.08 ¾ a bushel, ending back below its 20-day moving
average, and soymeal for May by 2.3%
at $455.90 a short ton.
A number of reasons were given for the selling, including
the reversal of the fund inflows that have buoyed soybeans and soymeal, and
plenty of other ags including softs and wheat,
"It may be we are no long flavour of the month," one trader
"They've had a good run. Why not get out and look for the
next trend to follow?"
Certainly, open interest has been falling in soybeans and
corn futures this week, in what may be a sign of such a departure.
Corn open interest was down more than 5,500 contracts over
Wednesday and Thursday, with the soybean figure at nearly 20,000 lots.
'Sign of short-covering'
Still, there was another theory behind that too.
Darrell Holaday at Country Futures said: "Many feel that the
surge in buying on Wednesday and early Thursday was short-covering by the
Chinese." Perhaps of hedges held against long physical positions they have now
"That is very hard to confirm, but it makes sense given the
way the market acted early yesterday.
"On the rally on Wednesday and Thursday, the open interest
was decreasing, which is a sign of short-covering."
'Margins are sharply
Whatever, there is still talk of China attempting to cancel
a range of cargos from both Brazil and the US, potentially by selling them back
to the US at bargain prices.
"China's crush margins are sharply negative and crusher
losses are seen in the millions as weaker hog markets and bird flu impacting
poultry markets hits meal demand," Benson Quinn Commodities said.
The broker flagged talk that Chinese soybean crushers are meeting
this weekend to discuss their plight.
Sinograin, the Chinese grain reserves company, further lowered
the bar on expectations for the country's soybean imports in 2013-14, to 66m-67m
tonnes, below the US Department of Agriculture estimate of 69m tonnes.
'Fireworks are not
Still, it has to be said that soybean and soymeal prices are
still high by historic standards, even after Friday's declines.
On the price positive side, CHS Hedging said that "soybean
basis is firming across the country".
RJ O'Brien noted that even if Chinese buyers to cancel
orders, their unshipped purchases from the US for 2013-14 are down to 1.1m
tonnes, with vessels apparently nominated for more than 500,000 tonnes of that,
making it difficult to shift.
"Old crop soy fireworks are not over," he said.
And remember that the USDA estimate for US soybean exports
for 2013-14 is, at 44.4m tonnes, 2.8m tonnes above the level committed to for
this season or already shipped.
Rains on the Plains?
In wheat, the
weather outlook gave bears traction, with some rain on the horizon for Plains
winter wheat regions.
Not that the problems of a lack of soil moisture will be
solved. "Significant dryness will continue across central and south western
wheat areas," weather service MDA said.
But "a few showers will favour south eastern Oklahoma and
north eastern Texas today and Saturday," of up to half an inch, with snow of up
to 3 inches in parts of Nebraska and Kansas.
Mr Feltes said: "Some weather models suggest more precipitation
for the central US hard red winter wheat belt," if noting that Commodity
Weather Group "is sceptical".
'Not as cold'
Furthermore, "the extended US temperature outlook, while
still tracking below normal, not as cold as prior model runs," Mr Feltes added,
helpful when wheat seedlings are emerging from dormancy.
And this, of course, after the NOAA spring outlook on
Thursday which suggested some drought relief for the southern Plains.
Wheat for May closed down 1.5% at $6.93 ¼ a bushel in
Chicago, while dropping 1.6% to $7.69 ¾ a bushel in Kansas City-traded hard red
winter wheat itself.
In Europe, Paris wheat for May ended down 0.2% at E210.75 a
tonne, supported by some weather fears.
"Cold weather is due in France this weekend and there are
reports that a lack of snow cover in the Baltic States has resulted in
higher-than-usual winterkill," Openfield, the UK co-operative said.
Still French soft wheat has some condition to lose, with 75%
rated "good" or "excellent" in a France AgriMer report on Friday, up from 67% a
year ago, and stable week on week.
In London, wheat for May eased 0.4% to £168.25 a tonne.
It was left to corn
to provide some sport for bulls, even with a modest 0.1% gain to $4.79 a bushel
for May delivery.
And it was unclear whether even that was down to spreading
against wheat or soybeans.
Still, the grain does have some fundamental support, in
ideas from the NOAA spring outlook of the hangover from the cold winter in
potentially holding back US sowings.
"The frost depths are so incredibly deep and we have more
snow pack remaining that I think we are going to have spring fieldwork delays
in the far northern Corn Belt as well as into the Great Lakes region,"
USDA meteorologist Brad Rippey said.