If agricultural commodities had a, broadly, pretty dismal
debut in 2014, the second session of the new year found bulls in control.
That was in particular the case in arabica coffee, which soared 4.4% to 116.35 cents a pound in New
York, for March delivery.
The rebound was seen as being fuelled by technical factors, with
the beans continuing to defy broker expectations of a drop below 100 cents a pound.
Indeed, the March contract managed to regain a series of
moving averages, including the 20-day, 75-day and 10-day lines - and the
100-day which it ended above for only the third time since October 2012.
It is interesting that hedge funds have been taking a less
downbeat view than many brokers, cutting their net short position in New York arabica
coffee futures and options by more than 12,500 lots in the fortnight before
Christmas, to the lowest in seven months.
Where investors and analysts were in agreement was on cocoa, which closed up 2.3% at £1,717 a
tonne in London for May delivery, and by 2.4% to $2.699 a tonne in New York for
Although deliveries by producers to Ivory Coast ports are up
40% year on year to 904,000 tonnes, exporters believe, the trend is expected to
prove temporary, with the impact of weather setbacks earlier in the season seen
wreaking a hangover.
Elsewhere among soft commodities, robusta coffee for March bounced 1.9% to $1,644 a tonne in London,
helped by an estimate by India's state-run Coffee Board that the country's
overall coffee output (largely robusta) will fall 10.2% to 311,500 tonnes in
Huge Egyptian order
Grain and oilseed markets witnessed recoveries too, most
notably in wheat, which having
closed below $6 a bushel in Chicago in the last session for 19 months, bounced
1.5% this time to end at $6.05 ¾ a bushel, for March delivery.
The recovery was fuelled by a huge Egyptian order, of
535,000 tonnes, which came hours after Algeria purchased 500,000-550,000
tonnes, spurring ideas that prices are low enough to spark demand.
That has been a big issue for US wheat markets - and weekly
US export sales data showed why, coming in at 256,500 tonnes, below broker
forecasts of a figure of 350,000-550,000 tonnes.
"Net sales of 248,500 tonnes for delivery during the 2013-14
marketing year were down 58% from the previous week and 46% from the prior four-week
average," the US Department of Agriculture said.
In fact, details of the Egyptian tender showed that US hard
red winter wheat is well price competitive – excluding freight – being offered
as low as $273.14 a tonne by Louis Dreyfus.
While some French grain was offered at $296.90 a tonne, Romanian,
Russian and Ukrainian wheat cost $300 a tonne or more, but won patronage on
grounds of cheaper shipping costs to Egypt.
Wheat prices also gained support from ideas that the US
wheat crop may be suffering after all from the country's cold snap.
"Very cold temperatures early next week will likely result
in some widespread winterkill damage in northern Kansas and Nebraska,"
"Some winterkill damage will be likely there on 15-20% of
the Plains wheat belt."
Wheat's strength helped corn too, which also overcame some below-expectation
weekly US export sales data.
"Net sales of 154,500 tonnes for 2013-14 were down 90% from
the previous week and 80% from the prior four-week average," the USDA said.
This included a decrease of 116,000 tonnes booked for China,
which has rejected several US corn cargoes on grounds of containing a GM
variety unapproved by Beijing.
Indeed, this was the biggest weekly cancellation by China of
US corn since October 2012.
As a further setback, US ethanol production fell last week
by 13,000 barrels a day to 913,000 barrels a day.
"The weekly ethanol production number was down slightly,"
Darrell Holaday at Country Futures said.
"But so were ethanol stocks," down 78,000 barrels at 15.58m
barrels, "so nothing big in those numbers."
And as an extra fillip, Informa Economics lowered its
estimate for US corn production last year by 61m bushels to 14.162bn bushels
(despite raising its yield idea by 0.4 bushels per acre to 161.6 bushels per
Informa, citing lower use of nutrients by farmers in these
times of lower crop prices, also cut by 2.75m tonnes, to 67.4m tonnes, its
forecast for Brazilian corn output in 2013-14 - well below the USDA's 70.0m-tonne
Corn for March closed up 0.7% at $4.23 ½ a bushel in Chicago,
recovering from a contract low of $4.18 ½ a bushel set earlier.
March also recovered, after spending much of the day in negative territory, to
post a gain of 0.1% to finish at $12.71 ¼ a bushel.
Informa revisions were mixed, with a 31m-bushel upgrade to the
estimate for last year's US crop, to 3.329bn bushels, but a downgrade of 2m
tonnes to 57.5m tonnes in the forecast for the Argentine harvest, thanks to
lower planting hopes.
And as a real downer, there has been plenty of comment about
the oilseed's deteriorating technical in Chicago.
"Chart-wise, soybeans remain vulnerable to additional
liquidation after having failed to hold several key support levels in
yesterday's trade," Benson Quinn Commodities said.
Chicago-based broker Allendale said: "Technical damage to
the soybean and wheat charts yesterday may have a longer lasting effect unless
we can quickly stop the freefall.
"The March soybean contract closed below the key 100- and
200-day moving averages."
Furthermore, the soybean harvest has started in Brazil, "bringing
with it concern that China will begin to shift their interest to South American
soybeans and possibly cancel purchases of U.S. soybean shipments", US
At RJ O'Brien, Richard Feltes flagged "excellent yield"
reports, of 47.8 bushels per acre, from the early harvest in the key Brazilian
state of Mato Grosso.
Bumper export sales
However, strong weekly US export sales helped quell
Weekly US export sales were strong, at 943,400 tonnes of old
crop, "up 31% from the previous week and 27% from the prior four-week average",
the USDA said, besides exceeding market expectations of a figure of, at best,
That brought the total US sales and shipments so far in
2013-14 to 40.5m tonnes, or 1.49bn bushels.
"That number is now above 1.475bn bushels the USDA is
currently projecting for the entire crop year," Country Futures Darrell Holaday
And of 1.53m tonnes in actual exports, 716,600 tonnes headed
for China, reducing the volume up for potential cancellation - unless there are
GM concerns about US soybeans too, of course…