The tiptoe that investors made into negative territory in
early deals turned into more of a scramble as weather forecasts remained to a
large part benign, reducing the urge to take profits on short positions.
Sure, the outlook was looking a little drier for the
"It is worth noting that the GFS model is warmer and drier,"
Darrell Holaday at Country Futures said.
But there was no sign in the forecast of the extreme heat that
would threaten corn pollination and
In fact, "extended forecasts show little threat of above-normal
temperatures for the Corn Belt through mid-July, decreasing pollination
concerns," CHS Hedging said.
Benson Quinn Commodities said that "weather forecasts
continue to offer favourable conditions into the middle of July", just as "much
of the Corn Belt is quickly moving into the pollination phase on corn".
'Livestock stress may
And in fact drier weather would bring benefits, with MDA
noting that in the northern western Midwest, where fields have been inundated, "the
dry pattern there through late week will allow wetness to ease a bit".
Ditto, concerning Canada's soggy eastern Prairies too.
Meanwhile, further south, in hard red winter wheat country, showery weather for now
will give way to "drier and weather weather during the weekend and early next
week with highs in the 90s to 104 degrees Fahrenheit expected", World Weather
That bodes well for wheat harvesting, before fresh rains
forecast for late next week, although "livestock stress may evolve with the
heat and humidity expected during the weekend and early part of next week".
'Bouts of short
Sure, some investors did take profits by closing up short
positions ahead of a long weekend in the US, with grain markets set to close at
midday Central US time (18:00 UK time) tomorrow and reopen at 08:30 (14:30 UK
time) on Monday.
"Today is the last full trading day of the week and you can
already feel the holiday mode kicking in," CHS Hedging said.
"There have been bouts of short covering, ie buying,"
Darrell Holaday at Country Futures said, but added that "this has been limited".
Soft vs hard
But position-closing was most evident in an inter-market
spread, with Kansas City hard red winter wheat for September falling 1.1% to
$6.81 a bushel in late deals, on track for its lowest finish in four months,
while Chicago soft red winter wheat for September gained 0.6% to $5.75 ¾ a
That tallies with concerns over crop quality, undermined by
rainfall onto ripe kernels, which have grown in particular over the soft red
winter wheat crop of late.
However, data from the Kansas Wheat Commission have underlined
the setback to the Kanas harvest too from a drought-hit growing period followed
by late-season rains – exactly the opposite of what is desirable.
Data from Tuesday showed yields ranging from 15-75 bushels
per acre, and damage to test weights from the rains, with results for many crops
now falling below 60 pounds a bushel.
In Europe, there are concerns over late rains too, with
Agritel noting that "new thunderstorms are expected this weekend, which will
once more hamper the start of the harvest", as Agrimoney.com has already
highlighted in the eastern EU.
That said, this rains looks more of a threat more to hard
wheat, as grown in the likes of Germany, rather than soft wheat, as preferred
by, say, French farmers.
Still, Paris soft milling wheat for November end unchanged at
E184.25 a tonne, remaining at a nine-month closing low, with some European
wetness concerns chipping in too.
Back in the US, corn
received some bullish news on the demand side, with data showing a rise of 15,000
barrels a day to 953,000 barrels a day in US ethanol production last week, one
of the highest figures on record.
Furthermore, the Ukraine Agribusiness Club issued a downbeat forecast for Ukraine's corn harvest, citing cold weather as well as the country's
weak currency (a setback for imported inputs) and political unrest.
Still, the benign weather proved the trump card.
"The lack of any substantial heat in the forecast in the key
production areas has limited any substantial buying," Country Futures' Darrell
"In general, the major areas are soaked up and it will take
substantial hit to pull the crop condition off of its current high."
Corn for September closed down 0.7% at $4.13 a bushel, while
the new crop December lot ended down 1.0% at $4.18 ½ a bushel, the contract's lowest-ever
'Tightest in 10 years'
Soybeans, which started
the day somewhat firmer, lost these gains, if managing to outperform corn
nonetheless, again with benign US conditions holding sway over some bullish
CHS Hedging noted that "robust soybean exports out of Brazil
in June have some thinking their soybean stocks could be the tightest in 10
years come September 1", and certainly the country's cash market has been
behaving as if supplies are indeed somewhat squeezed.
While futures have dropped this week, cash markets have "firmed,
mainly in Brazil where the producer has completely shut down selling, and the cash
market was seen jumping $0.33-50 a bushel", Benson Quinn Commodities said.
That said, was this a World Cup effect, with producers
preferring to watch football? And there was also fresh talk of cancellations of
Chinese orders of Brazilian soybeans to worry about, potentially signalling
weakness in China's important oilseeds sector.
Soybeans for August dropped 1.0% to $13.14 ¾ a bushel, a
four month closing low, if leaving the contract above its 200-day moving
New crop November soybeans fell 0.5% to $11.41 ½ a bushel, also
a four-month closing low, but with the contract well below its 200-day moving
In New York, cotton,
hit by an International Cotton Advisory Committee downgrade to its price forecast for 2014-15 (starting next month), besides by an upgrade by India to
its forecast for its exports in 2014-15 (ending in September).
India raised its estimate to 11.4m 170-kg bales (1.94m
tonnes), from 9m bales.
December cotton closed down 1.3% at 72.47 cents a pound, its
lowest finish in two years.
'May restrain hedge
Raw sugar did better, nudging 0.4% higher
to 17.87 cents a pound for October delivery, helped by Indian news, and
lingering concerns over the country's monsoon, besides the stronger real (see
But for real gains, it was necessary to go to coffee, which for New York arabica beans closed up 1.4% at 173.30
cents a pound, September basis, nearly recovering their 20-day moving average.
The recovery was helped in part by some recent firmness Brazilian
real, whose appreciation raises the price, in dollar terms of assets in which
the country is a major player.
"The real has shown some marginal strength and this may
restrain some hedge pressure," Citigroup's Sterling Smith said.
'Running on fumes'
However, arabica beans also received some support from
London-based robusta coffee, which ended up 1.5% at $2,047 a
tonne for the September contract, its best finish in six weeks.
The increase, at a time when robusta's discount to arabica
beans is relatively low, reflected ideas of strong receipt of coffee certified
for delivery against futures traded on London's Liffe exchange.
"Within the first two days of July, approximately one-third
of the robusta stocks at Liffe have been purchased," said Mark Nucera, a provider of commodities analysis to a dozen US billionaires, who has for a while held a bullish view on robusta coffee.
The strong take-up reflects potentially the dearth of
supplies available elsewhere.
"Indian exports appear to be running on fumes," he said,
leaving Indonesia and Vietnam as the "primary sources" for robusta supplies.
"I think the global market is going to have a difficult time
obtaining sufficient supplies from these countries and I forecast this robusta
supply deficit will continue each month until mid/late October 2014 at a
minimum," he said.