PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:42 GMT, Tuesday, 17th Jun 2014, by Agrimoney.com
Evening markets: coffee, soybean prices suffer as funds exit

Sometimes, when Brazilians' attention is diverted by, for example, holidays it adds a boost to prices of commodities in which they are major players, as producer selling wanes.

That might have been expected especially so on Tuesday, when the country is not only hosting the football World Cup, but with the national team playing (as Agrimoney.com writes) against Mexico.

Maybe this time producers rushed to sell in time to get to the match.

Whatever, futures in arabica coffee, of which Brazil is the top producer, suffered badly, closing down 2.3% at 169.05 cents a pound for July delivery and by 2.2% to 171.95 cents a pound for the better-traded September contract.

'Bullishness looks to be passing'

That took the lot back below its 10-day moving average and, indeed, technical factors had a part to play, with the contract's failure to mount an offensive on tits 20-day moving average, at a little over 177 cents a pound, seen as a sign of depleted buying interest.

"Recent bullishness looks to be passing at least momentarily," Sterling Smith at Citigroup said.

"Weak price action over the last two sessions as taken its toll on the market and we are seeing some liquidation," also encouraged by a dearth of fresh bullish news for now.

However, the story of Brazil's drought-damaged crop "is in place and developing about as expected, and should keep prices supported, although the market will need some fresh inputs to drive it higher".

Another commodity in which Brazil is the top player, sugar, struggled too, easing 0.3% to 17.06 cents a pound in New York for July delivery and by 0.3% to 17.97 cents a pound for September delivery, hardly helped by a downbeat price forecast from Australia's Abares.

'Flooding a concern'

In Chicago's grains market, it was soybeans and, in particular, soymeal which felt the sting of selling.

And this despite the small, if unexpected, fall in the US soybean crop rating in data overnight, and ideas of rain potentially proving too much short-term.

"The next 10 days will likely see good moisture to the north if the US - too much," Darrell Holaday at Country Futures said.

Benson Quinn Commodities said: "Weather has heavy rains moving over the northern plains for a couple more days with flooding a concern in southern half of Minnesota and into eastern South Dakota."

And Minnesota is a big soybean producing state, typically ranking third behind Iowa and Illinois.

'Significant downside potential'

Still, the "good" to "excellent" rating for soybeans, at 73%, remains high, and the excessive rain looks for now only a temporary issue for the crop.

"Damage done of 6-8 inch rains in recent days in the north west Midwest is more than offset by beneficial/timely rains in surrounding areas," said Richard Feltes at Chicago broker RJ O'Brien.

Besides, investors were looking closely at technical factors, as soybean futures for July first fell below their 100-day moving average for the first time in four months, and then surrendered the $14.00 a bushel mark with apparently little fuss.

"The problem with the July contract is that there are still over 300,000 open contracts and a lot of that length is in the hands of funds," Darrell Holaday at Country Futures said, adding that there was "still significant downside potential for that contract".

'Scramble for supplies over'

Indeed, as an extra bearish sign, futures exhibited a so-called bear spread, with the July contract closing down 1.7% at $13.98 ¼ a bushel, losing ground to the November lot, which dropped a more modest 0.4% to $12.12 a bushel.

This is in part down to a closing of long July-short November spreads.

However, this price dynamic is also "a negative fundamental development as it confirms the scramble to grab old crop supplies is over", Mr Holaday said.

In soymeal, the July contract tumbled 2.5% to $450.70 a short ton, closing below its 100-day moving average for the first time in seven months, while the December lot eased 0.7% to $390.00 a short ton.

'Turnaround Tuesdays don't apply…'

Corn dropped too, dented by largely benign US weather, which offset ideas of a so-called turnaround Tuesday, in which grains reverse on the second day of the week a strong trend seen on the first.

"Turnaround Tuesdays don't apply in mid-June when weather is favourable, funds are exiting…" Richard Feltes at RJ O'Brien said.

There was the fillip of an order by Mexico of 134,500 tonnes of US corn for 2014-15.

Furthermore, as regards old crop, CHS Hedging noted that "basis levels continue to firm on thinning pipeline supplies".

Still, the pressure from favourable weather prevailed to send the July contract down 0.5% to $4.38 ¾ a bushel, with the new crop December lot shedding 0.6% to $4.39 ½ a bushel.

'Concern over grain quality'

It was left to wheat to keep hopes of bulls alive in Chicago, adding 0.1% to $5.81 ¾ a bushel, with ideas of rain actually seen doing damage to this crop.

Besides a drop in the condition of soft red winter wheat in Illinois, a major growing state, last week, as revealed in official data overnight, the hard red winter wheat crop is suffering a quality threat from harvest-time precipitation.

"There are concerns that excessive rains in hard red winter wheat country will further damage this year's already beaten crop," Citigroup's Sterling Smith said.

In fact, World Weather warned that "US hard red winter wheat country will receive frequent rainfall over the next week to 10 days maintaining some concern over grain quality".

'Torrential rainfall and flooding'

Meanwhile, further north in Canada "torrential rainfall and flooding will occur today and Wednesday in north-central and northwestern crop areas of Montana and southern Alberta, with rain totals of 3.00 to more than 6.00 inches resulting in some flooding and possible crop damage".

Furthermore, technically, with funds having cleared their net long position, there is less pressure on prices from that score.

"Funds are now sitting on a moderately-sized short position in the benchmark Chicago soft wheat contract which seems to have moderated selling for the moment in that contract," Benson Quinn Commodities said.

Kansas City hard red winter wheat for July actually did better than its Chicago peer, adding 0.7% to close at $7.13 ½ a bushel, retaking its 200-day moving average.

Minneapolis hard red spring wheat for July gained 0.6% to $6.83 ¾ a bushel.

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