PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:50 GMT, Wednesday, 26th Mar 2014, by Agrimoney.com
Evening markets: cotton, wheat retreat. But sugar in demand

Rains, which in Brazil knocked some of the stuffing out of coffee last week, did the same to wheat on Wednesday, helping drive it back below $7 a bushel.

Actually, other reasons were given for the grain's fall too, one being the wane in Ukraine concerns for now, which helped some stock markets post gains, with Frankfurt shares closing up 1.2%.

And then there is the prospect on Monday of two key US Department of Agriculture reports, one on US grain stocks and the other on spring planting prospects.

'Squaring positions'

Investors have started "squaring positions ahead of next week's key USDA stocks and planting intention reports", Benson Quinn Commodities said, with the stocks report in particular having a habit of producing large price moves.

"Little fresh news has allowed market to soften moderately after recent run up in prices, as fresh longs trim risk."

After all, hedge funds have moved to holding their largest net long position in agricultural commodities in three years, notching up many gains in the process, at least for early movers, to judge by performances by futures in the likes of wheat, coffee and lean hogs.

The market is now "trimming risk with long range fundamental outlooks both domestically and globally still bearish", Benson Quinn Commodities said.

Hard vs soft

However, it was rain which was given as the biggest cause of wheat's decline.

And, indeed, it was notable that Kansas City-traded hard red winter wheat, grown on the southern Plains where drought has been a big concern, fared particularly badly, losing 2.4% to $7.73 a bushel for May delivery.

Chicago-traded soft red winter wheat, grown largely in the Midwest, where dryness is of little concern, dropped 1.6% to $6.96 a bushel for May, keeping just above its 10-day moving average.

'A little bit wetter'

"Models for next week are actually a little drier in the midday run, but the projections for the next three days have become a little bit wetter," Darrell Holaday at Country Futures said.

"In addition, the system moving out of Texas and up through Oklahoma wheat areas is amounting to more moisture than was projected.

"That system is probably responsible for most of the selling today."

CHS Hedging said: "Improving weather in the major wheat areas in addition to moisture in the southern US belt is pressuring prices."

'Too light to ease dryness'

Not, it has to be said, that weather fears are over either in the US or abroad.

MDA cautioned that showers in the southern US today "should be too light to ease dryness and stress on wheat", if acknowledging that the six-to-10 day outlook is wetter in central and south eastern areas of the Plains wheat belt.

In Australia, there were ideas that recent rains have not been enough to refresh east coast soils ahead of autumn plantings, with official meteorologists cautioning over the likelihood of further dryness in the region ahead, with an El Nino a likelihood.

Still, the weakness spread to Paris too, where wheat for May fell 1.2% to E210.50 a tonne. London wheat for November, the best traded contract, dropped 1.1% to 159.80 a tonne.

'Negative for corn'

Back in Chicago, wheat's rise was, on the face of it, a negative for corn too, both grains being rivals for many uses.

And corn had an extra negative from ethanol data, which showed falling US production, down 6,000 barrels a day to 885,000 barrels a day last week. But inventories rose anyway - up 376,000 barrels if, at 15.65m barrels, not being large for the time of year a potential sign of softer demand.

Ethanol itself fell 0.9% to $2.944 a gallon in Chicago for April delivery, dropping further from Monday's rise above $3.00 a gallon for the first time since July 2011.

Mr Holaday also warned that the US weather outlook is "negative for corn as it indicates warmer temperatures in the Midwest along with some spring rain moving through the Corn Belt next week".

Both warmth and rain will be a boost to prospects for helping corn seedlings off to a decent start.

Indeed, US Commodities said that corn prices were "under pressure as warmer forecasts will help improve southern and Midwest planting prospects and fieldwork".

Spreads unwound

Furthermore, "Chinese buyers are thought to be waiting for the government to sell state reserves or for cheap corn to become available from Ukraine," US Commodities noted.

However, there was a twist from wheat's decline in that it offered some support to corn too, given the way that investors have placed their bets.

 "There is some unwinding of wheat/ soybean and wheat/ corn spreads today and that is providing some support for corn and soybeans," Mr Holaday said.

Corn for May in fact closed down 0.4% at $4.84 a bushel.

Dog fails to bark again

Soybeans for May in turn gained 0.8% to $14.40 a bushel.

The oilseed was also given assistance by another day passing without the announcement of order cancellations by Chinese buyers, putting extra strain on the US balance sheet.

The US Department of Agriculture is expecting sizeable cancellations even to get domestic stocks to a thin 145m bushels at the close of 2013-14.

Furthermore, soymeal remains in demand, adding 1.2% to $469.10 a short ton in Chicago for May delivery, offsetting a marginal loss to 40.73 cent a pound in soyoil, which was weighed by weakness in rival vegetable oil palm oil in Kuala Lumpur.

Cotton tumbles from peak

Among soft commodities, cotton found its early spring to two-year highs, on a spot contract basis, of 97.35 cents a pound for the New York May contract heralding a collapse back to 91.66 cents a pound at the close, a drop of 2.6% on the day.

Has the fibre again notched up its high in March?

The contract closed below its 10-day moving average for the first time in nigh-on a month.

Coffee volatility

But arabica coffee's descent ran into turbulence, as investors attempted to assess just exactly how much relief rains have given to drought-hit Brazilian plantations.

"Rains last weekend were less than expected, but overall the rains in March have been beneficial," was the assessment of Jack Scoville at Price Futures, who also noted that "forecasts for Brazil call for mostly dry conditions for the next week".

New York arabica coffee ended a topsy turvy session, up 0.4% at 176.00 cents a pound.

Raw sugar did even better, jumping 2.3% to 17.36 cents a pound in New York for May delivery, the highest in nearly two weeks, amid continued concerns over the potential for El Nino to disrupt production.

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