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
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
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
'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
"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.
Still, the "good" to "excellent" rating for soybeans, at 73%,
remains high, and the excessive rain looks for now only a temporary issue for
"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".
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
However, this price dynamic is also "a negative fundamental
development as it confirms the scramble to grab old crop supplies is over", Mr Holaday
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.
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
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
"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".
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.