That Chicago adage about futures "taking the stairway up,
but the elevator down" was wheeled out this week in relation to soybean markets.
It may yet apply to coffee
But it is already showing relevance to Chicago wheat, which has now lost two weeks'
gains in two sessions, as the May contract exceeded its retreat of the last
session by ending down 2.4% at $5.89 ¼ a bushel.
'Due for a correction'
The problems were in part technically based.
"The markets are heavily overbought and are due for a
correction," US Commodities said.
Benson Quinn Commodities said: "The softer tone in the wheat
markets is offering resistance. Short term and daily technical studies are
starting to rollover.
"Length in corn and wheat markets has to respect the weaker
technical structure that is developing."
May wheat did little to help its cause by, after topping
temporarily its 75-day moving average in the last session for only the second
time in three months, surrendering that line, and the 10-day, 20-day and 50-day
moving averages all in two sessions.
However, Benson Quinn Commodities said that investors should
also "question demand for US corn
and wheat at elevated prices".
And they did, after the USDA revealed US wheat export sales
of 365,100 tonnes last week, "down 14% from the previous week and 39% from the
prior four-week average".
The number was "a little disappointing", Darrell Holaday at
Country Futures said.
And the extent of the loss of US competitiveness on world markets
was only highlighted later by results of a tender by Egypt's Gasc grain authority.
Out of the running
The cheapest US wheat was offered at $279.50 a tonne by Louis
Dreyfus at $279.50 a tonne, more expensive than the cheapest Russian supplies,
priced at $276 a tonne, even without including the extra costs of shipping
across the Atlantic.
That represented a stark change from the previous tender, a
month ago, when Ameropa offered US soft red winter wheat, as traded in Chicago,
at $259.88 a tonne, more than $23 a tonne cheaper than Russian grain.
It was little surprise that Gasc opted for Russian wheat,
which undercut French origin too.
And US investors took the results badly, with wheat's fall
also exacerbated by some "aggressive" spreading by investors balancing short
bets on corn or wheat with long positions in soybeans.
Paris wheat at least had strong European Union weekly
exports, at a marketing year high of more than 900,000 tonnes, to rely on, and
ended up 0.3% at E198.00 a tonne for May.
Corn suffered too
as the spreading kicked in, and despite some decent US export sales last week
of more than 840,000 tonnes, "up 22% from the previous week, but down 39% from
the prior four-week average", the USDA said.
Benson Quinn Commodities said it questioned "how committed
the new fund length in the corn market is to holding on to said length", a
reference to a turn by hedge funds to a net long in corn futures and options
earlier this month, after running a net short since July last year.
Extra pressure is coming from the start of the Argentine harvest,
now seen as 10% completed.
Corn for May closed down 1.4% at $4.54 ½ a bushel,
surrendering its 10-day moving average.
'Margins have become
But it was soybeans
which saw the most dramatic reversal, jumping to contract highs on strong US export
data, only to close lower, despite being the beneficiary of the spreading against
The best-traded May lot jumped 3.4% to $14.45 ½ a bushel,
the highest for a nearest-but-one contract in seven months only to end at
$13.90 a bushel, a decline of 0.5% as profit-taking kicked in, encouraged by
the weakness in grains.
Besides, there are growing concerns over the support that
the market can expect from China.
"The crush margins in China have become a disaster because
of sinking demand for soymeal," down
to the impact of bird flu on consumer buying patterns, "at a time when there
are rumoured to be millions of tonnes in transit or unloading at the ports in
China", Country Futures' Darrell Holaday said.
Soymeal itself for May ended down 0.5% at $451.60 a shot ton
The November soybean contract ended down 1.2% at 11.55 ½ a
bushel, putting an Agrimoney.com sell recommendation well in the money already.
The selling did not extend, however, to soft commodities,
which had extra help from, besides Brazil drought worries, a stronger real too.
Brazil's currency gained 1.2% against the dollar to its strongest levels of 2014,
lifting the value of major Brazilian assets, such as coffee and sugar.
for May closed up 0.9% at 179.30 cents a pound, with drought concerns of course
playing the biggest role, especially after exporter Terra Forte pegged Brazil's
coffee crop at 46m-48m bags, well below initial hopes for somewhere near 60m
Of that only 30m bags would be arabica, well below the 38m
bags which Macquarie forecast earlier this week, besides the last harvest of
39.2m bags (according to Macquarie).
Raw sugar for May
added 2.3% to 18.07 cents a pound, the best finish for the contract in nearly
four months, amid increasing expectations for a world sugar production deficit