Evening markets: June starts for ags where May left off...

June started much where May left off for agricultural commodities, with futures in coffee and wheat, bulls' former favourites, continuing their fall to earth, while old crop soybeans retained some appeal.

Arabica coffee futures for July dropped 2.9% to 172.35 cents a pound in New York on Monday, the first trading day of the new month, the contract's weakest finish in three months.

The trend of estimates for Brazil's drought-hit coffee crop has staged a firm rebound, with exporter Mercon on Friday pegging output at 50.5m bags, comprising some 33m bags of arabica and more than 17m bags of robusta beans.

"The estimate was much higher than estimates calling for significant losses seen in the market previously," said Jack Scoville at Price Futures.

A trade house estimated the crop at 53m-55m bags, not far off estimates before drought struck Brazil's coffee belt early in 2014.

'Range of estimates large'

Sure, there are many who retain downbeat expectations.

"Right now the range of estimates remains large," Mr Scoville said.

Concerns are also ticking up over dry conditions in Vietnam, where rainfall in the Central Highlands growing region has been some 50% below normal since March, according to CPC, after dryness early in 2014 too.

"Vietnamese growing conditions have been drier than normal and it is possible that production for next year will be impacted," Mr Scoville said.

Arabica vs robusta

However, a clincher for bears was technical weakness, with the July contract earlier, for a third successive session, finding the 10-day moving average too tough a ceiling to break through.

This time, however, the 100-day moving average, at 174.08 cents a pound, failed. The July contract closed below it for the first time in four months.

The weakness had some impact on robusta coffee futures, but not much, with London's benchmark July contract closing down 0.2% at $1,933 a tonne, showing some signs of stability.

But then Vietnam is the top producer of robusta beans, with only minimal arabica production.

'Can't find a catalyst…'

Technically, wheat bulls had some grounds for hope in that Chicago futures are near-universally recognised as "oversold", after its nine-day losing streak, the longest since 1998.

But that couldn't prevent a 10th successive negative finish, in fact the 17th lower close in 18 sessions.

"Markets continue to trade into oversold conditions, but can't find a catalyst worthy of anything more than modest short covering," Benson Quinn Commodities said.

It is difficult anyway for wheat markets to rally at this time of year, when the winter wheat harvest is gearing up, bringing extra supplies which press on values, but especially when most weather threats are in abeyance.

'Disease pressure increasing'

Sure, there are still some concerns in eastern Australia, where northern New South Wales and southern Queensland is unduly dry, and markets remain on alert over the former Soviet Union too, for meteorological more than political reasons at the moment.

While dryness in Central Region appears to be easing, World Weather reported "no rain of significance fell in the Volga River Basin the past few days," while temperatures reached the lower-to-middle 80s Fahrenheit.

"Volga River Basin rainfall this week will continue restricted along with that in Kazakhstan," the weather service said, adding that "production cuts have already occurred in Kazakhstan and downward pressure is suspected on some of the Volga Basin crops".

MDA cautioned that excess rains may be becoming a problem in parts of Ukraine and Belarus, where "wetness concerns are mounting".

"Disease pressure is also increasing," Don Keeney at the Maryland-based weather service said.

'Pleasant surprise'

But in the US, rains in the drought-hit southern and central Plains "will continue to improve moisture there, especially in eastern Colorado, Nebraska and Kansas", where they "will improve moisture for late wheat growth", Mr Keeney said.

In fact, on the early harvest score Benson Quinn Commodities noted that an initial test from hard red winter wheat in Oklahoma came in at about 20 bushels per acre, with test weights of 56-57 pounds a bushels, equivalent to about 74-75 kilogrammes per hectolitre, and protein of 13%.

"For this area, this was a pleasant surprise," the broker said.

Kansas City hard red winter wheat, the type under threat from US southern Plains drought, dropped 0.6% to $7.18 ¼ a bushel for July delivery, a two-month finishing low, which took the contract right to its 100-day moving average, beneath which it has not closed since February.

That said, Chicago wheat for July dropped 1.0% to $6.20 ¾ a bushel, a three-month closing low, with the contract, the world benchmark, particularly susceptible to weakened fund sentiment.

"Funds liquidated still have plenty of length to get out of," Benson Quinn said, as latest data from the Commodity Futures Trading Commission showed.

Demand signs

Sure, there were in fact some signs of demand around, with Jordan tendering for 100,000 tonnes of optional origin wheat, and Pakistan buying 100,000 tons of wheat.

Some 125,000 tonnes in "recent" sales to Indonesian four millers was reported too.

Still, it is the Black Sea, and its competitive prices, only enhanced by a weakened rouble and hryvnia, which are taking the orders.

Wheat fell in Paris too, albeit by a modest 0.5% for the November contract, although this was enough to take the lot to its weakest close in three months, of E190.50 a tonne.

London wheat for November closed down 0.8% at £142.60 a tonne, an ace from the contract's lowest finish ever, with the growing prospect of an early, and strong, harvest adding to pressure from international prices.

'Plantings are still behind'

Also in Europe, Paris rapeseed for August closed down 0.7% at E348.00 a tonne – the lowest close for a spot contract in 10 months.

Besides pressure from falling palm oil prices – rapeseed is a vegetable oil-heavy oilseed, more so than the more meal-heavy soybeans – rapeseed was weighed down by a 200,000-tonne upgrade to 21.8m tonnes in Strategie Grains' forecast for the European Union crop, the world's biggest.

Spring sowings progress in Canada, the top grower of canola, the rapeseed variant, has also improved, many observers say, although that is not a universal assessment.

"Canadian spring plantings are still behind due to pockets of wet soil conditions," CHS said, noting "that "some private estimate ranges from 10-20% of acreage may go unplanted".

Heavy rains in the northern plains and portions of western Canada have limited progress in some areas, but isn't a fresh enough item to attract the interest of the trade," said Benson Quinn Commodities.

Indeed, one measure of the level of Canada concerns, Winnipeg canola futures, fell 1.1% to Can$435.20 a tonne, the seventh negative close in eight sessions.

'Favourable start'

But not all oilseed contracts fared so badly.

Sure, November soybeans dropped in Chicago, by 0.3% to $12.29 ¾ a bushel, closing below their 40-day moving average for the first time since February.

US Department of Agriculture data later are expected to show US plantings some 72-74% complete, in line with the five-year average.

"Soybean plantings should show good progress, and combined with opportune weather conditions there should be a favourable start to the growing season," CHS Hedging said.

At Country Futures, Darrell Holaday said that "conditions are simply ideal for the new crop corn and soybeans", if questioning how much of this has already been factored into futures prices.

"The market knew the rain was coming as the models have been very accurate in pointing out the weather trends."

'Not economic'

However, July soybeans gained 0.5% to $15.00 ½ a bushel, climbing back over their 10-day moving average, beside the psychologically important $15.00-a-bushel mark, with concerns continuing over the tightness of old crop supplies.

Indeed, Rabobank, even as it downgraded its hopes for new crop soybean futures, flagged that old crop prices would "stay high" for now to "ration remaining supplies and slow demand".

While the USDA forecasts record US soybean imports of 90m bushels in 2013-14 to ease the supply squeeze, "the current import pace is not supporting that projection," the bank said.

Furthermore, "transporting soybeans to the interior US, where the bulk of crushing capacity is located, is not economic".

In fact, more will be known on US soybean imports on Wednesday, with Census Bureau trade data for April.

Data later

For corn, it was new crop futures which outperformed, adding 0.2% to $4.58 ½ a bushel for December delivery, while the old crop July contract eased 0.25 cents to $4.65 ½ a bushel.

Supply-wise, there is little so far to question a bumper US harvest, with sowings seen coming in at 95% complete in tonight's USDA data, and the first crop condition rating at or above 70% rated "good" or "excellent".

Last year's first rating was 63% good or excellent.

Still, without pressure from harvest itself, it was a little easier for futures to correct a little oversold conditions, especially when producers are said to be holding of sales at these lower prices.

Furthermore, there remains talk that the US government is reducing ideas for a cut to the ethanol mandate, so underpinning demand for corn in making the biofuel.

Corn, sugar lead hedge fund selldown on ags
Morning markets: new month, new money into ag markets?
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events