Making headway was tricky for many agricultural commodities
Just ask investors in cotton,
as the market negotiated continued talk over whether a bounce like last year,
when New York's July 2012 contract bounced 35% trough to peak in a short
squeeze on the approach to expiry, may be about to repeat itself.
A slump of 4.2% to 87.29 cents a pound in the July 2013
futures contract suggested that many believe that the spike this time, which has
hit some 16.7% at its widest, is past its best.
OK, the rise of 4,000 contracts in the net long position in cotton
in the latest week, to 44,115, did disguise a rise in the gross short position,
to more than 11,000 lots, a three-month high.
But for those steering clear the pre-expiry shenanigans, the
new crop December lot offered a more focused view of market thinking in falling
0.5% to 88.99 cents a pound.
Luke Mathews at Commonwealth Bank of Australia reminded that
while the US Department of Agriculture last week lowered estimates for US
supplies, "global cotton ending stocks, at a record 92.5m bales, remain
Cocoa showed a
smaller fall in New York, closing down 1.6% at $2,215 a tonne for September delivery,
pressed by an effort by Ivory Coast to boost purchases by merchants of beans by
offering a refund on the many which are failing to make quality criteria.
"A refund on quality varying from 58-130 CFA francs
($0.12-0.26) per kilogramme is granted on all cocoa purchases with a bean count
from 116-140 beans per 100 grammes," the country's coffee marketing board
While there are still doubts that end-users will take bean
counts above 120-125 or so, the move extended a three-day decline which has
taken the best-traded September contract down more than 6%.
Raw sugar proved
something of a maverick in rising 0.9% to 16.93 cents a pound, extending its
recovery spurred by covering of speculators' extensive short position in the
Ideas of another year of surplus world production in 2013-14
(and with early talk of another surplus in 2014-15 too) prompted hedge funds to
take their net short position in New York raw sugar futures to a record 88,000
lots, latest regulatory data showed.
This included a record gross short position of 234,581
However, there has been some news Sucden Financial called "mildly
bullish", with cane mills switching more production to ethanol, for which there
should be a ready Brazilian market, given the relationship of prices of the biofuel
"It seems hydrous ethanol prices are high and demand is
picking up, with the price at near 66% of gasoline at the pumps," Sucden's Nick
Still, he urged "caution" over the rally, saying that "producers
have been waiting for such a move and are likely to sell into it, especially
Brazilian producers who are benefitting from the weakness of the real against the dollar".
In fact, the Brazilian currency fell again against the
dollar, hitting 2.17 for the first time since May 2009.
'Producers do not
want to let go'
In Chicago, it was corn
which proved something of an unlikely winner.
OK, old crop July corn's 2.1% jump to $6.68 ½ a bushel, its
best finish since March, was not such a surprise, coming against a backdrop of
concerns over old-crop supplies.
"Stocks are tight, but feed users still want corn. And
ethanol margins are positive," Jason Roose at broker US Commodities told
In fact, ethanol producers are making a cash margin of $0.25
per gallon, with blenders making even more, according to Morgan Stanley.
"But producers do not want to let go, especially when they
have had such a hard time planting new crop corn," for which the broker
estimates that US sowings will fall 2m-2.5m acres below initial expectations
thanks to the wet spring.
Strong weekly US export data, as measured by cargo
inspections, of 14.1m bushels, more than double those a week before, also helped.
'Full yield potential'
But the 1.0% recovery to $5.38 ½ a bushel in the December
contract was less foreseen, given rains over the weekend and warmth ahead -
just what many farmers had been looking for to improve their crops.
And this when Paul Georgy at broker Allendale noted that "trade
is expecting an improvement of 1-3 points in the good and excellent categories"
in US Department of Agriculture corn crop ratings this evening.
Broker RJ O'Brien noted that the Ohio crop, for instance, "looks
great" with "full yield potential", with 80% of Indiana crops appearing in "very
good" condition too.
"Dakota corn ratings will improve tonight" in the USDA
report, RJ O'Brien said, if flagging setbacks still in sodden north west Iowa.
'There is always
But is the US weather quite as benign as it first appears?
Darrell Holaday at Country Futures said: "Moisture over the
weekend was generally widespread.
"But there were areas that would like to have seen some rain
that seen none, or very little, and there are also regions that received some
heavy rain that would rather have been dry.
And as for the warmth ahead, "even though the crowd says
this crop needs heat, there is always nervousness in a market when there are
signs of that heat arriving," Mr Holaday said.
It was excessive heat, after all, which depressed last year's
corn yield to 17-year low.
For soybeans, the
weather outlook was seen as less supportive, with dryness seen most definitely
improving hopes for plantings which, unlike for corn, remain in full flow.
Indeed, plantings are seen in the USDA report as advancing
to 88-90% completion, up from 71% the week before, if behind the 92% average,
according to US Commodities.
The first crop ratings for soybeans will also be released, with
a good or excellent reading expected at 60-65%, around the average of some 65%.
November soybeans eased 1.0% to $12.85 ½ a bushel in Chicago.
overestimated China's demand'
Old crop soybeans had some support from the old-crop demand
story and comments from Morgan Stanley, besides from US monthly crush data
which, at 122.6m bushels for May, was larger than investors had expected.
However, the strong demand picture was eroded by US weekly exports
of a feeble 2.76m bushels, and this while Shanghai JC Intelligence was
questioning the USDA estimate for Chinese imports.
The USDA has "grossly overestimated China's demand", the
analysis group said.
July soybeans did better than new crop, but ended down 0.3%
at $15.12 ½ a bushel nonetheless.
little changed in Chicago, down 0.25 cents at $6.809 ½ a bushel for July, caught
between the strength of fellow-grain corn and its own fundamentals weakened by pressure
from the northern hemisphere harvest.
Sure, "rain cut-off the start of some significant US winter wheat
cutting that was starting", Country Futures' Darrell Holaday, with harvest
rains a threat to quality too.
But this support "will likely be short-lived as the harvest
progress will get fired back up by mid-to-late week".
And ideas so far appear to be of a crop which is exceeding,
rather than lagging, expectations.
'Reported good yields'
In Europe too, harvest hopes were lifted by a, small, European
Commission lift to yield hopes. (Upgrades were bigger for barley and corn).
INTL FCStone added that "although we retain the risk of harvest
delays driving an upward blip in basis, the market is focused on early
harvesting of winter barley in Russia and the Ukraine, along with reported good
yields being achieved".
With a stronger euro adding pressure, November wheat closed
down 0.3% at E195.75 a tonne in Paris, a one-year low for the contract.
In London, November wheat finished down 0.2% at £165.00 a