PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:39 GMT, Monday, 12th May 2014, by
Evening markets: grain prices slip further, coffee perks up

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.

The dollar 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 Ukraine".

Chicago wheat 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".

 Favourable corn plantings

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 Feltes said.

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.

Firmer softs

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.

Evening markets: Wasde sinks corn. Coffee drops even further
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