PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:55 GMT, Thursday, 31st Jul 2014, by
Evening markets: soy, wheat crawl higher. But cotton tumbles

Coffee futures were the star among agricultural commodities on Thursday, soaring 7% (as reported here).

But they weren't the only gainers although, as ever in the current market climate, it took quite a bit of effort to get grains and soybeans lifted.

Especially on the last day of the month, associated with market weakness as funds withdraw cash.

Strong sales

Wheat futures got some help from strong US export sales data, of 801,000 tonnes last week, well above expectations of at most 550,000 tonnes.

Brazil, a bit hard red winter wheat buyer, extended its purchases, meaning it has ordered, or already received, 965,000 tonnes of US wheat for 2014-15, less than two months in, not far below the 1.23m tonnes this time a year ago, amid worries over the South American country's domestic supplies.

That said, many commentators are cutting expectations for this year's Brazilian wheat crop, which the official Conab crop bureau has pegged at a record 7.4m tonnes, thanks to some frosts this month, besides the unusually strong rains of late which are receiving a mixed reception.

While raising soil moisture for soybean sowings, expected to start in September, the rainfall is not so welcome at a time of corn and cotton harvesting, besides causing the premature flowering helping life coffee futures.

Export problems

In Europe, rains are still proving most unwelcome for wheat growers, in threatening grain quality.

Indeed, ADM Germany, formerly known as Toepfer International, reminded of the problems in France, where Hagberg falling numbers, a key milling specification, measuring sprouting, "France will presumably be very low", the trading house said.

This means that "a substantial part of the quantities that were originally planned to be exported to Algeria are not likely to be executed", driving French merchants to buy supplies from Germany and Poland as alternatives, as has reported.

(As has also trailed, the UK wheat crop is bucking the trend, so far, with some excellent Hagberg numbers, if weak protein levels, although rain is in the forecast.)

'Increasing evidence of quality downgrading'

Meanwhile, the International Grains Council made one of the first attempts to quantify the damage to Europe's crop by raising the amount of the grain used in the EU as feed, as downgrades of milling wheat kick in.

"Amid a fairly heavy wheat supply outlook and increasing evidence of quality downgrading in the harvest, feed use in the EU is forecast to be up by 6.2m tonnes, to 49.5m tonnes," the council said.

The IGC trimmed by 1m tonnes to 3m tonnes its forecast for growth in world wheat inventories in 2014-15.

Chicago wheat for September closed up 0.6% at $5.30 a bushel, closing back above its 10-day moving average.

Quality conundrum

While Paris wheat for November slumped 2.9% to E170.50 a tonne, a fresh four-year closing low for a spot contract, this market has become hard to read thanks to uncertainty over the specifications for what wheat is actually deliverable against the contract.

"Physical basis shows a rarely seen volatility as a result of concerns over quality and uncertainties about the nature of quality requirements on the underlying Euronext contract," Agritel said.

"These uncertainties should be quickly removed to avoid loss of hedging efficiency."

Co-operative Soufflet, which operates one of the delivery points for Matif wheat, said on Wednesday that it is awaiting further information on the French harvest before deciding on its acceptance policy.

UK merchant Gleadell said that Paris wheat "may soon become a 'feed wheat contract' with the criteria to deliver considerably lower than the specification needed for export".

'Area of concern'

Back in Chicago, soybeans crawled higher, ending up 0.1% at $10.82 a bushel, given some support by decent US export data, of 174,000 tonnes of old crop and 1.09m tonnes of new, in line with the top end of market expectations.

But perhaps a bigger help was some worries over dryness damage to US soybeans entering their sensitive pod-setting period.

"The midday GFS weather model was drier than the previous runs in the western areas," said Darrell Holaday at Country Futures.

"In my mind the only area of concern, and it is a concern, is the Missouri River Valley, and the concern is the soybeans.

"The run at midday was not as generous with the moisture in the Missouri River Valley as the previous runs."

Argentina fears

There was also some comment over the miss by Argentina, a major exporter of soybeans and soy products, of its deadline for paying off hedge-fund bond investors with which it has been in a legal battle.

So Argentina is now in default.

"This news was not wholly unexpected and is not expected to have much immediate impact on the markets," Benson Quinn Commodities said.

"But in the long term it could shut off sales of beans by Argentine producers as they once again take to holding soybean stocks for better currency exchange rates in the foreseeable future as default will weigh on the Argentine currency."

'High yields are anticipated'

Corn for December, however, failed to join the rally being largely past its vulnerable pollination stage which could have put upbeat forecasts for US yields at threat.

Sure, US export sales were OK good 174,000 tonnes, plus 1.09m tonnes for 2014-15, but within the range of forecasts, and not enough to provoke buying.

"The key factors remain the same as before - the weather is perfect in the growing areas of the US Midwest, meaning that high yields are anticipated," Commerzbank said.

December corn ended down 1.3% at $3.67 a bushel, a contract closing low, little helped either by strong South African export prospects.

Cotton frays

For cotton, US export sales appeared not too bad, at 254,400 running bales for 2014-15, including 104,700 running bales for the sensitive market of China, whose demand is being particularly closely watched thanks to changes to its domestic subsidy regime.

Actual exports, at 118,400 running bales, soared 64% week on week.

But it was not enough to prevent a fresh lurch lower by December futures, which ended down 1.8% at 62.37 cents a pound, a fresh contract closing low, with investors still concerns over the implications of China's reforms, and with expectations for the US crop rising.

Coffee to see 'protracted' bull run, record prices
Rain damage to EU wheat ups estimate for feed use
UK wheat harvest bucks EU quality problems, so far
South Africa corn exports to hit 20-year high
Morning markets: coffee prices jump. But grains retreat anew
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