The first day of spring, for the northern hemisphere, didn't
provide too much bounce for agricultural commodities.
Indeed, the session was notable for its price losses,
spurred by the removal of weather premium, perhaps fitting given the end of
winter, and the renewed strength in the dollar.
As investors continue to read the runes of the Federal
Reserve's first monetary policy statement, and subsequent press conference,
since Janet Yellen took charge as chair of the US central bank.
One of the most seized-upon comments Ms Yellen made, to
journalists, was that the time lag between the conclusion of the Fed's
quantitative easing programme and the first interest rate rise would be
"something on the order of around six months".
That could potentially be April next year, earlier than many
analysts have expected, and prompted strength in the dollar, up 1.0% against a basket of currencies over the last two
days, quite a significant move in forex terms.
'Warmer and wetter
Many agricultural commodities were in the last session able
to ignore the rise in the dollar – which, in making dollar-denominated assets
such as commodities more expensive as exports undermines demand.
Wheat, for instance,
had protection then from concerns over the dryness afflicting US winter wheat, with
concerns over a dearth of rain in Australia, eastern Europe and Ukraine too.
However, the weather shield softened on Thursday with
prospects of rain for some needy parts of the US.
Darrell Holaday at Country Futures noted that the GFS
weather was pointing to "a warmer and wetter pattern with significant moisture
moving through the Plains and Midwest from April 1-4".
And, while Toepfer and Strategie Grains added to the, still
low level, fears over European dryness, MDA flagged the potential for
much-wanted rain in eastern Australia next week.
'Taken a breather'
As for the Ukraine crisis, "tension in Crimea appears to be
easing which is perhaps offering a little resistance to the grains", Benson Quinn
Chicago wheat futures for May, having touched $7.23 ½ a
bushel earlier, the highest for a spot contract since April last year, ended at
$7.03 ¾ a bushel a fall of 1.7% on the day.
"The market has taken a breather this afternoon, after good
recent gains traders have sold some wheat to book profits," traders at a major
European commodities house said.
In Europe itself, Paris wheat for May fell 0.9% to E211.25 a
tonne, while London wheat for May hit £172.05 a tonne, an eight-month high for
a nearest-but-one contract, only end at £168.95 a tonne, a drop of 0.6%.
'Forecasts for a lot
Still, these losses were dwarfed by the setback in arabica coffee, which continued its
correction from two-year highs as recent rains in Brazil's coffee belt, and
forecasts for more, diminish concerns over the setback to crops from drought.
Jack Scoville at Price Futures highlighted "speculative long
liquidation due to short-term chart trend changes and also on forecasts for a
lot of rain to appear in Brazil coffee areas in the next few days.
"Current forecasts for Brazil still call for rain this
weekend. The rains could provide further stability for production after the
very dry January and February."
Some rainfall has already been reported this month, "which
has helped the trees support the current production a little bit", Mr Scoville
MDA noted that rains in Brazil "through Monday… should favour"
states including Minas Gerais, the top coffee producing state, and Sao Paulo,
responsible for about half the country's cane production.
"Amounts will be 0.25-1.5 inches, locally 3 inches," the
weather service said.
Societe Generale, forecasting prices retreating close to 150
cents a pound, estimated the Brazilian coffee crop at 50.9m bags, well below
figures around 60m bags that were floating around, but above recent figures
beginning with a 4.
Arabica coffee for May plunged 6.1% to close at 174.15 cents
a pound, taking its losses so far this week above 12%.
proved a little more resilient in dropping 2.5% to $2,037 a tonne in London for
May, down 6.3% for the week.
"London stays supported by potential drought conditions in
Vietnam," the major producer of robusta beans, where the main Central Highlands
growing region is suffering a shortfall of rain, "and the possibility of
production losses for the next crop," Mr Scoville said.
'Big boost to crops'
The fall in coffee, and prospect of Brazilian rains, was
hardly helpful for raw sugar either, given that both have been
supported by the country's drought.
"The weather in Brazil remains important," Mr Scoville said,
noting that, this weekend, "private forecasts imply that quite a bit of rain
will be possible, to provide a big boost to crops".
Furthermore, the sugar market "still has plenty of product.
Brazil might have less sugar, but there still seems to be enough in the market
from Thailand and the demand side does not seem strong".
The strength of Thai supplies was also highlighted by
Societe Generale, which in a quarterly report remained somewhat bullish on
sugar prices, if not quite as upbeat as previously.
Sucden Financial also highlighted the ampleness of supplies,
saying that "chat around the trade seems to be concerned with bulging stocks in
certain origins", with rumours of "some destinations selling back to their
There is a "general
sense of just piecemeal buying/offtake on the horizon", the broker said.
Not all bulls have left the building, with Commerzbank
noting that, with some damage to Brazilian cane from drought irreversible, and some
disappointment over India's sugar output, "the supply situation on the global
sugar market is thus tightening slightly".
"[This] justifies the higher price level," the bank said,
forecasting that "in the medium term, the price should also rise above the 18 cents-a-pound
Raw sugar for May closed down 1.6% at 17.05 cents a pound,
while May white sugar ended down
1.2% at $454.00 a tonne in London.
Back in Chicago, corn
fell too, feeling pressure from tumbling wheat and stronger dollar, with strong
US exports having been a big support to prices, countering the huge weight on
values from last year's record American harvest.
(Weekly US corn export sales were a decent 745,800 tonnes.)
As negative news on exports ahead, Cofco, the Chinese
state-owned grain trading giant, said that the country's corn imports may fall
below 3m tonnes in 2013-14, diminished by the rejection since November of several
US cargos containing an unapproved genetically modified variety.
The US Department of Agriculture has forecast Chinese imports
at 5.0m tonnes.
Corn for May fell 1.8% to $4.78 ½ a bushel, ending just
above its 200-day and 20-day moving averages.
'Trying to get out of
But of course the major Chinese import fears concern soybeans, and whether and when the
country will start cancelling orders from the US in earnest, with talk of weak
Chinese crushing margins, ample supplies already in port, and purchases cheaper
In fact, "there is more discussion of China trying to wash out
of double-digit cargoes of US and Brazilian soybeans," Country Futures' Darrell
"There is even some talk of [US] crushers trying to get out
of some contracts."
And some of these soybeans appear to be heading to the US.
Allendale said that "the news in soybeans would be
considered negative under most circumstances," not that "several cargoes of
soybeans have been loaded in Brazil and on their way to the US.
"There has been confirmation of five and rumours of as many
as seven more switched from China to the US.
Export sales keep
And while the USDA's Brasilia bureau cut its forecast for
the Brazilian soybean crop overnight, at 88.0m tonnes, the estimate remains
above those of many other commentators, and next year's crop was pegged at a
might 97m tonnes.
Still, it was difficult for investors to be too hard on
soybeans when weekly US export sales data came in at a positive 202,200 tonnes
for old crop, as well as 437,500 tonnes of new.
That took to 44.4m tonnes the amount of soybeans the US has
exported, or committed to export, in 2013-14 - 2.8m tonnes more than the USDA has
forecast for the whole season, of which we are now only a little over half way
Soybeans for May closed up 0.2% at $14.33 ¾ a bushel.
Big meal deals
The oilseed was also supported by a 1.0% rise to $446.50 a
short ton in Chicago soymeal futures
for May, with the feed ingredient itself gaining support from export data.
The USDA revealed weekly export sales of 242,900 tonnes for
2013-14, "up 52% from the previous week and 32% from the prior four-week
average", and a further 244,000 tonnes for next season.
These figures were well ahead of expectations.