PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:18 GMT, Wednesday, 21st May 2014, by
Evening markets: soybeans find demand, Coffee beans don't

Coffee, sugar and wheat futures remained out of favour with investors on Wednesday, but soybeans were firmly in demand, helped by a crack by the benchmark soymeal contract at its highest ever close.

Arabica coffee futures, again, struggled to rediscover the buoyancy they had last week on Brazil harvest fears, with a lack of harvest news, yet, confirming ideas of heavy crop losses to drought allowing prices to drift.

"The market is still waiting for news of actual harvest yields in Brazil, and so far the news has been hard to find," said Jack Scoville at Price Futures, adding that demand from roasters for now has been "not real strong".

'Market is well supplied'

At Citigroup, Sterling Smith said that "the market is seeing little in the way of fresh news and holiday trade is beginning to soften interest on the speculative side".

He added, that "for the moment the market is well supplied as old crop coffee supplies have been moving along," although sales of new crop have slowed with falling prices.

Sure, US Department of Agriculture officials came in with some downbeat estimates for Costa Rican and El Salvador production, with the latter falling to an 80-year low, as the Central American rust outbreak maintains its grip.

But with the market focused on Brazil, July coffee fell 2.3% to 181.40 cents a pound, closing back below its 75-day moving average for only the third time in 2014.

'Outlook is not positive'

Raw sugar for July too dropped below its 75-day moving average, as the enthusiasm at the bullish comments from New York sugar week last week faded, to be replaced by concerns over demand.

Sucden Financial's Nick Penney said: "Despite weather issues, the outlook is not positive in the absence of physical off-take reflected in physical differentials, lower-than-usual vessel line-ups in Brazil ports, and a mounting urgency by Thai millers to sell this year's record output" in the face of the country's unrest.

As for the weather issues, although concerns may remain about El Nino potentially bringing excessive rain to Brazil's Centre South, Mr Scoville flagged that that "the Indian monsoon is spreading through the Bay of Bengal and seems to be getting off to a normal start".

He added: "The market needs demand, too, and there has not been much demand news."

Raw sugar for July dropped 0.8% 9 in New York to 17.44 cents a pound, taking losses over the past week to 4.4%.

'First rain in a number of weeks'

And, in Chicago, wheat returned to the doghouse, closing down 0.9% at $6.64 a bushel, a fresh two-month closing low also back beneath its 75-day moving average, for the first time since February.

The prospects of rain for the southern Plains continued to inspire the removal of risk premium, even if it is not obvious that the precipitation can actually spur a recovery in crops.

"Forecasters are calling for the first general rain in a number of weeks for the hard red winter wheat region for Thursday into the weekend," CHS Hedging said.

"Although the hard red winter wheat crop is probably beyond the point of adding yield, these rains should help maintain what is already there."

Rain for Russia?

Sure, the broker also noted that "there are yield concerns for Black Sea wheat, as temperatures are forecast to be above 90 degrees Fahrenheit in the wheat-growing regions of south east Russia and Kazakhstan toward the end of the week.

"In some of these areas less than 20% of their normal rainfall has been received."

But there is an increasing prospect of rain ahead, with MDA noting that the six-to-10 day outlook is wetter for regions including Central and Volga Valley, where drought concerns have been biggest.

While "no improvement is expected there through the weekend, some slight improvements will be possible next week", MDA said.

'Planting pace should accelerate'

Kansas City hard red winter wheat, the type under threat from US southern Plains drought, dropped 0.9% to $7.61 a bushel.

Still, bulls received some solace from Minneapolis hard red spring wheat, which added 0.5 cents to $7.38 a bushel, supported by residual fears for sowings in the northern Plains, although warmer weather this week is expected to allow some catch-up

"Spring wheat planting pace should continue to accelerate as we move further into the week," CHS said.

In Paris, wheat dropped too, by 0.5% to E198.75 a tonne for November delivery, with little cause for buying, with the easing concerns over nearby Russia.

'Bullish psychology'

Still, soybeans had a positive day, with market increasingly taking a more benign view of dynamics in China, the top importing country.

Sure, the amount of soybeans sold at the latest state auction was, at 80.9%, down from the 92.1% last week, and prices 39 yuan lower a 4,283 yuan a tonne.

But that was better than investors would have forecast a couple of weeks ago.

"China was able to sell 81% of the soybeans offered from state reserves at above market prices and that may have stirred up bullish psychology," Jefferies Bache said.

'Reviving feed demand'

There is also talk of improved margins for China's soybean processors, with Allendale reporting that "Chinese crush margins have improved to near first quarter profitable returns" as the economics of the livestock sector have improved.

Fintec noted talk that "Chinese crushers bought a few cargoes of beans yesterday", if from South America, with reports also that they purchased more than 600,000 tonnes of soybeans last week for September delivery.

"Chinese demand is appears to be rebounding as the recent downdraft looks to be past, as strong local demand for eggs and pork are reviving feed demand," Citigroup's Sterling Smith said, flagging also strength elsewhere in the complex in soymeal.

Indeed, Jefferies Bache noted "optimism about strong world meal demand".

Soymeal itself soared 2.3% to $498.10 per short ton for July delivery, the contract's best ever close, while July soybeans ended up 2.4% at $15.05 a bushel, its fourth-highest finish.

The contract got an extra boost from holding over the $15.00-a-bushel mark, viewed as a key technical point.

'Major benefit'

The strength in soybeans extended to the new crop November lot too, which added 1.7% to $12.53 a bushel, its highest finish in 11 months.

With December corn easing 0.2% to $4.71 a bushel, that took the soybean:corn ratio into fresh virgin territory for these contracts, at 2.66:1.

That is a big jump from levels below 2.40:1 last week.

The improved northern Midwest planting conditions have been a big factor in this, as well as warmer weather for crops further south too.

"Warmer temperatures this week are a major benefit to early crop development for areas that are planted," CHS Hedging said.

Ethanol jumps

Old crop corn actually did better, in edging 0.2% higher to $4.74 a bushel for July delivery, given some support by weekly ethanol data which showed a rise of 3,000 barrels a day in US output last week to 925,000 barrels a day.

Furthermore, stocks dropped 312,000 barrels to 16.99m barrels despite the raised production.

The data helped ethanol itself soar 2.6% to $2.18 a gallon for July delivery, proving support for prices of the biofuel's main raw material, corn, too.

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