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