PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:38 GMT, Friday, 21st Mar 2014, by Agrimoney.com
Evening markets: coffee, soy, wheat fall as bears take helm

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 since 1999.

"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 remain volatile."

Key price

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 week.

'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, too.

"It may be we are no long flavour of the month," one trader told Agrimoney.com.

"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 sold?

"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 negative'

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 over'

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.

'Higher-than-usual winterkill'

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.

'Spring fieldwork delays'

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.

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