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
"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
'Market is well
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
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 ¼ 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
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
Kansas City hard red winter wheat, the type under threat
from US southern Plains drought, dropped 0.9% to $7.61 ¼ a bushel.
Still, bulls received some solace from Minneapolis hard red
spring wheat, which added 0.5 cents to $7.38 ¾ 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
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
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 ¼ 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.
The strength in soybeans extended to the new crop November
lot too, which added 1.7% to $12.53 ½ a bushel, its highest finish in 11
With December corn easing 0.2% to $4.71 ¾ 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.
Old crop corn actually did better, in edging 0.2% higher to
$4.74 ½ 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.