PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:09 GMT, Wednesday, 2nd Jul 2014, by Agrimoney.com
Evening markets: corn dips, wheat diverges, coffee gains

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 Midwest.

"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 yield.

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 evolve'

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 said.

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 covering'

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 a bushel.

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.

Harvest results

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 Holaday said.

"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 a bushel, the contract's lowest-ever finish.

'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 inputs.

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 a bushel, a four month closing low, if leaving the contract above its 200-day moving average.

New crop November soybeans fell 0.5% to $11.41 a bushel, also a four-month closing low, but with the contract well below its 200-day moving average.

Cotton frays

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 pressure'

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 below).

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.

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