Grain markets fell back on Monday amid the turbulence created Friday in the wake of the
US Department of Agriculture monthly Wasde report, which gave the first
readings for the 2014-15 year, although soft commodities fared better.
Meanwhile, wider financial markets ticked higher Monday,
despite the ongoing tensions between Russia and Ukraine as well as renewed
concerns of slowing economic activity after President Xi Jinping, suggested
China must adapt to a "new normal" pace of growth.
The Dow Jones share
index stood up 0.6% in late trade after extending to hit a record 16,695-points
amid increasing optimism for the world's largest economy.
meanwhile had less direction as the greenback consolidated after advancing last
week against the majority of G10 currencies, particularly the euro after
European Central Bank president Mario Draghi talked the single-currency lower
at last week's ECB meeting.
The dollar index stood at 79.90 in late trade, little
changed on the day.
Wheat still bullish
Back among ags, Richard Feltes, head of market insights at broker
RJ O'Brien, flagged the reversion of markets to focusing on crop supply threats,
with Friday's Wasde report past.
"Now that the May report is in the history books the
market is free to focus entirely on weather," Mr Feltes said, adding that wheat prices were being undermined by
rains in the drought hit US southern Plains and the absence of "weekend
violence surrounding the unauthorised weekend election in eastern
futures for July settled down 1.0%, at $7.15 a bushel.
'Bullish factors clear'
Despite the softer finish, many observers maintain a bullish
outlook on wheat futures, and see wheat likely to trade back towards last week's
peak of $7.44 a bushel.
"Bullish factors in the market were clear," noted
analysts at Phillip Futures.
"I cannot remember a growing season with such disparate
conditions," stated Gail Martell of Martell Crop Projections, adding that "severe
drought has damaged wheat in Kansas, Oklahoma and Texas."
In addition, the situation between Russia and Ukraine will
likely limit price weakness, with the EU expected to expand its sanctions list
to include a further two Crimean companies and 13 individuals following the
strong "yes" vote from pro-Russian organised referendums over the
weekend, the results of which Ukraine has called "a farce".
"Renewed tensions in Ukraine continued providing
a supportive backdrop to US wheat prices as such geopolitical uncertainty is
wrecking the country's financial system and has the potential to weigh on
Ukraine's wheat output," Phillip Futures said.
Soy has 'significant
downside price risk'
The rest of the grain complex saw similar declines to wheat,
although for differing factors.
"The USDA's reports highlighted what appears to us to
be a fundamentally bearish new-crop balance sheet," said Anne Frick, senior
oilseed analyst at Jefferies Bache.
Soybean July futures ended down 1.5% at $14.65 ˝ a bushel
at the Chicago close.
"We still think there is significant downside price
risk in the soybean market," cautioned Ms Frick, adding that, technically,
"the soybean market has a potential double high in place in the July contract".
However, weakness may take a while for this to feed through.
Richard Feltes suggested
that the "soybean market is still dominated by old crop fundamentals,"
with prices supported for the moment by the "need to keep US crushers supplied
before early summer soy imports ramp up".
Reports of favourable planting conditions have also kept corn prices under pressure amid
"additional downside follow-through" noted traders.
"Late day field reports today indicate that a substantial
amount of corn is going in under favourable conditions," RJ O'Brien's Richard
However there appeared to be a more cautious tone ahead of
the latest crop progress report from the USDA.
"Perhaps 50% of US corn has been planted, up from
29% May 4," indicated Gail Martell.
Conditions are expected to deteriorate across the week
however as "fine sunny warm weather will give way to sharply cooler
conditions this week… when a cool Canadian air mass sinks into the central
United States," predicts Martell.
Chicago corn futures for July closed down 1.6% at $4.99
˝ a bushel.
Signs of bargain hunting have been seen in the softs across
the day, particularly coffee following the aggressive rout Friday, which saw arabica coffee for
July, plunge 5.9% to 183.90 cents a pound, the lot's lowest in a month.
"Arabica is finding support at the 183.00 level and
looks prepared for a rebound," suggest Sterling Smith of Citigroup, noting
that "a firm close today can reignite upside ideas".
In fact, arabica coffee for July, settled at 189.25 cents a pound, up 2.9%
from Friday's close.
"Any recovery above the 76.4% Fibonacci level [at
191.92 cents a pound] would look to target the 40 day moving average [at 194.31
cents a pound] at first before attempting to converge on levels around 200
cents a pound," noted Kash Kamal, analyst at Sucden Financial.
Players are likely to remain somewhat cautious ahead of
production figures from the Brazilian national supply company Conab.
"We are looking for another cut in production, possibly
below 45m bags," said Citigroup.
Elsewhere in the softs, New York raw sugar futures finished up a modest 0.5% at 17.29
cents a pound for July delivery.
Cocoa for July closed
just $1 a tonne higher at $2,865 in New York, bucking a four session down
streak and holding above the three-month low set last week.