Grain markets failed to hold on to early headway.
But soft commodities managed decent gains, especially coffee, which rebounded strongly on
indications that the Brazilian arabica
harvest may turn out to be as bad as had been feared.
Ipanema Coffees, a supplier to Starbucks, warned that its
production may near-halve year on year after the drought early in 2014 in Brazil's
main coffee producing state of Minas Gerais stunted crop development.
The group sees its output falling to 65,000 bags, from 127,000
bags a year ago, and a forecast of 80,000 bags in January.
In part, the decline reflects the decreased size, as well as
number, of beans collected, with potentially 700 litres needed to meet the 60kg
bag weight, compared with a typical 500 litres.
'Still waiting for
The report came into a market eager for news on the Brazil
While analysts have made large cuts to their estimates for
Brazil's coffee harvest, which were initially around 60m bags, they have warned
that it is tricky to forecast given the highly unusual nature of a drought at
what is meant to be a wet time of year when, for instance, sugar cane mills
take seasonal breaks.
"The market is still waiting for news of actual harvest
yields in Brazil, but the reports have been hard to find," Jack Scoville at
Price Futures said.
However, after the Ipanema news, Judith Ganes-Chase, at J
Ganes Consulting, said that "finally, the truth is coming out".
Ms Ganes Chase on Wednesday, even as robusta coffee futures were tumbling, cautioned over bearish
interpretations of a Vietnam production report at the heart of the price retreat.
Ball vs beans
As an extra support, Citigroup's Sterling Smith noted "some
sporadic concerns about the World Cup resulting in work stoppages, which could
cause some issues".
The football (soccer) World Cup starts in Brazil next month,
just as the country's coffee harvest is ramping up.
Arabica coffee for July soared 3.3% to 181.95 cents a pound
in New York, staying comfortably ahead of its 100-day moving average, and
nearly retaking its 10-day moving average.
London robusta coffee for July gained 2.2% to $1,949 a
Selling gone far
The strength spread to cotton
too, which stood up 1.9% at 86.45 cents a pound in late deals in New York for July
delivery, amid ideas that a correction on ideas of better US sowing conditions
had gone far enough for now.
The new crop December contract was 1.0% higher at 78.48
cents a pound, after all, offering rich pickings in terms of profit taking for
investors with short positions.
And raw sugar for
July gained 2.2% to 17.48 cents a pound, extending its bounce from the bottom
of its trading range, reached on Tuesday, and retaking its 200-day moving average.
"We are now approaching the mid-point of the range in the July
contract with the 17.60s cents-a-pound, high-volume battleground seemingly the
magnet for values," Nick Penney at Sucden Financial said.
"Whether we return to test the upper reaches at 18 cents a
pound and over is doubtful in the near term without any fresh bullish news to
give the market traction."
However, such gains were a distant dream for grain investors
who, having seen Chicago wheat futures
depart from the script somewhat in early deals by posting gains, saw them
return right back on message, a negative one, to close lower for the 15th
time in 16 sessions.
The strength in early deals had gone counter to ideas that
month ends typically attract fund selling and cash withdrawal – although position
closing could mean tying up, profitable, short contracts, of course.
There are some "dry weather forecasts for Russia's grain
producing area", broker Allendale noted.
Traders are keeping one eye on a shortfall of rain in
Central Region, Volga Valley and North Caucasus, given Russia's history of
dryness at this time of year, hitting wheat production forecsats and sending
world prices soaring.
'Stress spring crops'
But in parts of Central Region at least, "rains have eased
dryness, and additional improvements are expected," weather service MDA said,
if warning of "notable dryness in north eastern North Caucasus, Volga Valley
and western Kazakhstan, which will continue to stress spring crops, especially spring
Still, while "chatter about dry conditions in and near the
Black Sea region are getting some attention, but the issue isn't anywhere near
being critical at this point", Benson Quinn Commodities said.
"The trade isn't concerned about overall global wheat
The International Grains Council cut its forecast for world
wheat production, but by a modest 3.4m tonnes to 694.1m tonnes, with a
reduction of 4.0m tonnes to 55.0m tonne in the forecast for the drought-hit US
crop offset by a 1.0m-tonne upgrade to 12.9m tonnes in hopes for Argentina.
'Back on the
Thinking of the US crop, with harvest ramping up, viewed as
some 10% complete in Texas, wheat futures are seen likely to come under harvest
pressure, viewed as often tailing off with the coming of July.
Although the harvest "has gotten off to a pretty slow start
with very minimal yield and quality data, this weekend is expected to be a
fairly active harvest weekend for winter wheat, which could put the wheat
market back on the defensive," CHS Hedging said.
Chicago wheat for July dropped 1.0% to $6.32 ½ a bushel, the
contract's lowest close in three months.
In Paris, wheat for November did a little better in falling
0.5% to E191.50 a tonne, but then there was talk that Algeria bought 700,000
tons of French wheat for August shipment.
London wheat for November edged 0.2% higher to £144.35 a
tonne or November delivery, given some support from softer sterling, and having
fallen by 9% so far this month.
Back in Chicago, fellow grain corn dropped too, little helped by International Grains Council
upgrades to expectations for both world production and inventories in 2014-15.
Estimates for crops in the likes of the European Union,
Mexico, Russia and Brazil were raised by an aggregate 5.0m tonnes.
And weekly US ethanol data were not so encouraging.
While production rose 2,000 barrels a day to 927,000 barrels
a day, meaning extra usage of corn, inventories rose 499,000 barrels to 17.5m
barrels, raising questions over demand.
Furthermore, there are broad concerns over the reinfection
of US pig farms with porcine epidemic diahorrea virus (PEDv), dashing hopes
that herds would gain lasting immunity after an outbreak.
"There have been more reports from pork producers of PEDv
coming back a second time," after an initial one from Indiana, Allendale noted.
"Many believe we have not seen the tight numbers from last
winter's spread of the virus."
Some more distant lean hog futures gained on the prospect of
thinner supplies, with the October contract adding 0.8% to 106.00 cents a pound
in Chicago, although nearer-term, the July contract shed 0.6% to 120.60 cents a
"Lean hog futures have been hit with technical and fund
liquidation the last few sessions," Allendale said.
For grain markets, the prospect of a smaller herd implies
less feed use.
"The corn market traded lower on concerns of the deadly pig
virus in the US. A recurring outbreak of the virus raises concerns of reduced
feed demand," CHS Hedging said.
And, as Sanderson Farms pointed out, expansion is not too
forthcoming in the US poultry sector either.
With, as Benson Quinn Commodities said, "conditions for new
crop soybean and corn development remaining very close to ideal", corn for July
dropped 0.6% to $4.69 ½ a bushel, with the new crop December lot shedding 1.4%
to $4.63 a bushel.
It was left to soybeans
once again to keep bullish hopes alive, although gains were hardly convincing.
That said, even in rising 0.1% to $12.44 ½ a bushel, the November
contract lifted the new crop soybean: corn ratio to 2.69: 1, around the top of
its trading range.
Soybeans are being helped by a reversal of bearish sentiment
on China, helped by talk that the country may soon stop weekly sales from state
inventories, and that processors are returning to buying, after appearing to concentrate
on ditching orders for much of the last six weeks.
In fact, there was talk that China bought two cargoes of Brazilian
soybeans, albeit not for shipment until March next year.
Among other news, China's Ministry of Commerce estimated the
country's imports this month at 5.94m tonnes, down some 600,000 tonnes month on
month but well above the 5.1m tonnes in May last year.
The Argentine soybean crush rose last month, by more than
300,000 tonnes to 3.89m tonnes, with the country also ditching domestic taxes
on biodiesel, and lowering the export duty to 11% in an effort to encourage
shipments (and government revenues).
Meanwhile, Brazil has announced, as expected, a rise to 6% in
its minimum biodiesel blending rate as of July 1, and 7% from November 1, from
the current 1%.
"Each 1% increase is likely to increase soyoil usage by
30,000-40,000 tonnes per month assuming soyoil accounts for 75-80% of the feed
stocks," New York-based Jefferies Bache said.
'Rally near term is
Still, in Chicago, Richard Feltes at RJ O'Brien cautioned
that a "cash-led soybean price rally near term is unlikely, with domestic soy
basis stable and meal premiums easing".
Chicago soybeans for July gained 0.1% to $14.99 a bushel,
signally failing to hold above $15.00 a bushel, where they spent much of the