PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:20 GMT, Thursday, 17th Apr 2014, by
Evening markets: coffee, wheat sidestep ag market weakness

Wheat and, especially, coffee ended the week on a strong note, as some of the better performers of late, notably the soy complex, succumbed to pre-Easter profit-taking.

Grain and oilseed markets, broadly, achieved a negative end to the week, with soft commodities mixed.

But arabica coffee outperformed in style, rebounding 8.1% to 204.10 cents a pound in New York for July delivery. This after on Tuesday notching up its biggest one-day loss since August 2010.

'Moisture-starved coffee trees'

Technical factors helped, with the contract shying away from a fall below its 20-day moving average, at 188.36 cents a pound.

At Phillip Futures, Vanessa Tan, citing use of moving average convergence/divergence analysis, a momentum indicator, "technical indicators suggest that the uptrend in arabica coffee prices is still intact", even after a heady rise of more than 70% from late January lows.

And, while there are forecasts for rain ahead for the Brazilian coffee belt, where drought has been at the heart of the jump in coffee prices, the Commodity Research Bureau downplayed the potential for crop revival.

"Despite the forecasts for rain, Brazil's coffee output potential for the next couple of seasons may be reduced as farmers [had] cut the use of fertilizers, and the moisture-starved coffee trees are more susceptible to disease," it said.

One of the latest estimates for the Brazilian harvest, from the country's National Coffee Council producers group, pegged the harvest at 40.1m-43.3m bags, below a January forecast of 46.5m-50.1m bags.

Volumes drop

Meanwhile Brazil's Cooxupe, the world's largest coffee co-operative, has warned that results from the early harvest are even worse than had been expected, with losses in the south of Minas Gerais, the top coffee-producing state, expected to be "above 30%".

Still, more mundane factors are also seen as having a hand in Thursday's rally, with the prospect of the Easter weekend, or the whole "semana santa" holy week in many Hispanic countries, seizing up liquidity.

At Price Futures Group, Jack Scoville noted that even yesterday while lower prices had got "roasters a little more interested in buying, many producers in Latin America were already closing down for semana santa.

"There were some offers made, but not a lot was able to get done."

Thursday's trading volumes on New York July futures were down more than 40% on the day to 16,332 lots, according to Reuters data.

In London, robusta coffee was given a lift by arabica's performance, gaining 2.6% to $2,136 a tonne for July delivery.

'Pulled wheat off its highs'

Wheat came nowhere near matching that performance, closing up a modest 0.5% at $6.91 a bushel In Chicago for soft red winter wheat for May delivery, and by 0.5% to $6.99 a bushel for the better-traded July contract.

That was well below an intraday expedition above $7.00 a bushel for both contracts, before much of the fizz went out of Ukraine fears when it, Russia, the US and the European Union agreed steps to "de-escalate" the country's crisis.

"That pulled wheat off its highs," Darrell Holaday at Country Futures said.

Weather outlook

Still, bulls did have some other cards to call on to support their cause, with the weather outlook for the dry southern Plains better, but hardly that encouraging for growers.

Latest weather model runs have "delayed the movement" into the region of a system expected to bring "some" moisture to the south eastern parts, Mr Holaday said.

"It is not a significant system, but all moisture is helpful."

US Commodities said that "while rains in the south west Plains on April 19 and the east central Plains on April 20 will improve moisture for wheat, significant reductions in drought and crop stress are not anticipated".

Weather service MDA added that the outlook for the south eastern Plains had turned drier in the six-to-10 day outlook.

Strong export sales

MDA also restated a caution of dryness in Western Australia, the top Australian grain-growing state, much of which has received 50% or less of normal rainfall over the past six weeks.

"Dryness will continue to build over the next 10 days," the weather service said.

And, back in the US, weekly export sales data trounced forecast by coming in at 438,000 tonnes for old crop and 360,000 tonnes for 2014-15.

The old crop figure was "up noticeably from the previous week and 48% from the prior four-week average," the US Department of Agriculture said, while broker US Commodities termed the figure bullish.

Cold damage?

US Commodities also noted that "concerns are still in place over conditions and quality of the hard red winter wheat and soft red winter wheat crops after the fairly cold temperatures the past couple of days".

CHS Hedging said: "Freeze damage across southern US growing regions is being assessed."

Kansas City hard red winter itself added 0.4% to $7.57 a bushel for May delivery, and 0.5% to $7.64 a bushel for July.

But in Europe, Paris wheat for May dropped 0.5% to E217.50 a tonne, despite Strategie Grains trimming its estimate for this year's European Union crop and raising its forecast for exports in both 2013-14 and 2014-15.

'Significant progress in planting'

Corn proved unable to keep up with wheat, as US weather forecasts continue to foresee more favourable weather for this grain, in terms of warmer conditions to lift soil temperatures and encourage sowings after an unusually cold winter.

"The weather models are a little wetter in the Midwest for the next 10 days than yesterday's runs, but they are consistently warmer and most thoughts are that there will be significant progress next week in US corn planting," Mr Holaday said.

CHS Hedging said: "Drier and warmer weather should allow farmers in the southern Plains to make significant progress on corn planting this weekend and early next week."

While ethanol recovered from its trouncing in the last session, adding 1.7% to $2.114 a gallon in Chicago for June delivery, corn succumbed to further selling, ending down 0.6% at $5.00 a bushel for July.

Signally, the contract closed below its 20-day moving average for the first time since late January, as its rally was about to kick off.

Weak data

Soybeans dropped too, although to nowhere near major moving averages, on profit-taking after setting contract highs in the last session, in soymeal as well.

US weekly export sales hardly helped, in coming in at 19,200 tonnes for old crop, "down 76% from the previous week and 79% from the prior four-week average", according to the USDA.

"Soybeans turned lower following the release of the weekly export sales data this morning," Benson Quinn Commodities said, noting that the data "did include cancellations of 68,200 for unknown and 54,700 for China", a sensitive topic in the soy complex.

"Old crop soymeal sales were lower than expected as well and were off 80% from last week."

'Risk is ratcheting up'

Returning to China, that remains a sensitive topic, with talk of a stack more defaults of import orders.

"Traders are talking about 12 cargoes of Brazilian soybeans cancelled by China and being redirected to the US," US Commodities said.

The US Soybean Export Council was taking of up to 2m tonnes of soybean order defaults.

"This could affect the prices at which buyers are willing to book future cargos," New York-based Jefferies Bache said.

So the "extreme" tightness in the US balance sheet "may be on borrowed time as a price-making factor. In our view, the risk is ratcheting up for longs even though they have a profit and have been in control of this market."

'Active sellers'

Benson Quinn Commodities also noted that "South American producers have been active sellers on the rally", although "that hedge pressure has been well absorbed as the speculative trade continues to want to own soybeans".

And while bulls got some support from an indefinite wage strike by port workers at Argentina's Rosario grains hub, with staff at some crushing plants expected to follow suit, soybeans for May closed down 0.3% at $15.14 a bushel.

The July contract ended down 0.4% at $15.02 a bushel.

Soymeal for July lost 0.3% to end at $478.00 a short ton.

'Buyers have good coverage'

Back in New York, raw sugar for July fell 2.0% to 17.33 cents a pound.

Jack Scoville noted "ideas of weak demand and news that the Brazil harvest is underway", meaning pressure on prices from increased supplies.

Indeed, while there are fears for an El Nino setting in, and unduly wet weather, "for now the drier weather promotes rapid harvest progress".

On the demand site, "ideas are that most buyers have good coverage for now," he added.

Morning markets: Ukraine clashes revive wheat price rally
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