The week ended with what looked like something of a reversal
theme going on.
The crops which investors were down on earlier in the week,
including wheat (until Thursday) sugar and coffee, ended on strong note.
Meanwhile, the favoured ones, such as soybeans, which hit a record on Tuesday, and cocoa declined.
And Friday often witness some reversals as traders close
positions ahead of the weekend, and the element of risk that two days without
the ability to trade brings, meaning long positions get shortened, and vice
For sugar, which soared 2.7%, and coffee, which added 3.1%,
the calendar may have brought another price positive factor, in that it is a
holiday in Brazil, the producer of both soft commodities, and meaning no
pressure from farm selling from that quarter, at least.
However, the default move was actually upwards, ironically
thanks to poor US employment data.
These showed the creation of 96,000 jobs last month, more
than 30,000 below estimates, but which stoked ideas of action by the US central
bank to boost its economy ie, undertake a third round of monetary easing.
With easier monetary policy seen as an inflationary danger,
besides bad news for the currency, in debasing it, it would represent a
particular fillip for commodities, which are seen as relatively inflation
ones are more appealing as exports on a weaker greenback which indeed dropped
1.0% on Friday.
The average commodity, as measured by the CRB index added
That sugar bounced so much was also down to ideas that the
close at a two-year low in the last session may have been overdone, given that there
are still some risks to the accelerated cane harvest in Brazil's Centre South,
if end-of year rains arrive early, as often occurs in an El Nino period.
"It seems reports of some physical demand are persuading
traders not to stay too short of the front spread," Nick Penney at Sucden
"Added to this is the continuing concern that when Brazil Centre
South spring rains arrive, it will curtail this year's crop and millers will be
tempted to leave cane standing 'till next year to improve development and
Raw sugar for October ended at 19.38 cents a pound, up $0.51
on the day.
'Just 10-30% of their
Cocoa's drop down 0.6% at $2,676 a tonne for December
delivery was indeed attributed largely to profit-taking.
However, forecasts for much-needed rain in West Africa also encouraged
"That prices in the past two weeks have nonetheless climbed
by more than 10% is doubtless due to the fact that the continuing dry weather
in West Africa is dampening the outlook for the main crop, due to begin in
October, and thus increasing the supply risks in 2012-13," Commerzbank said.
"Some parts of Ivory Coast and Ghana have seen just 10-30% of
their usual rainfall over the past 45 days.
"That said, rain is forecast for the next few days, which
should help bring prices down."
In Chicago, wheat
proved able to catch market tailwind, closing up 1.5% at $9.05 a bushel for
December, and taking two-day gains above 4%.
Paris wheat was helped up 1.3% to E265.00 per tonne for
November delivery, with its London peer adding 0.5% to £205.95 a tonne.
But then the grain had some held from fundamental news too,
with Rabobank cutting its forecast for the Australian crop below 23m tonnes,
and more than 3m tonnes below the US Department of Agriculture forecast, due
for revision on Wednesday in the latest Wasde report.
The trouble is the dryness in Western Australia, where some
crops look set to be abandoned, the bank said.
In the US, Paul Georgy at broker Allendale said: "The
western wheat-growing areas of Australia is providing support to world wheat
'Numbers were bullish'
Furthermore, US weekly export data for wheat were solid, at 573,000
tonnes, at the upper end of market expectations.
And then there was the Statistics Canada data showing that
wheat stocks in the major importing country fell 18.1% over 2011-12, with the
drop actually 21% if stripping out the less-widely-traded durum variety used in
"Wheat has continued to be the leader to the upside as the
Stats Canada numbers were bullish for wheat and canola," the rapeseed variant, Darrell Holaday at Country Futures
In fact, for canola, the stocks decline was even more
dramatic, of 64%, which, coupled with lower harvest forecasts cut to 14.7m
tonnes by the Canadian Wheat Board earlier this week speaks of another blow
to world hopes for oilseed supplies.
Canola itself added Can$0.60 to Can$640.60 a tonne in Winnipeg
for November delivery, but Paris rapeseed edged 0.2% lower to E517.25 a tonne.
That time of year
Indeed, their relatively modest performance was down largely
to another weak session for soybeans,
which dropped for the third successive day since setting a record on Tuesday.
In part this was down to another calendar factor, in that
harvest is approaching, bringing a spike in supplies, and at a time when
farmers appear willing to cash in on elevated values.
"It is the seasonal weight of harvest that is pressing the
basis on both corn and soybeans. This is a difficult time of year to be positive
the market," US Commodities said.
This is currently taking some of the sting out of reports of
dryness in Brazil, which the world is relying on to refill soybean pipelines
early in 2013.
"Brazil weather has no rain the next two weeks. North Brazil
(Mato Grasso) is anxious to start plantings of soybeans," the broker said.
As a further downer, US weekly soybean export sales were
(relatively) poor too, at 526,000 tonnes, old crop and new combined, below
With a dearth of announcements of sales through the USDA's
daily alerts system this week too, this may be a sign that soaring prices are
beginning to ration demand at last, questioning the need to go higher.
Informa Economics brought Chicago's November soybean lot
temporarily back into positive ground, with a forecast for the US soybean yield of 35.4 bushels per acre, below the official USDA number, and confounding
expectations of more generous figure.
However, Chicago's November lot eased 0.7% to end at $17.36 ½
'Clear signs of
too, despite the weaker dollar and all, little helped by dismal US weekly export
sales of 25,000 tonnes.
"Corn exports are showing clear signs of rationing," US
However, it was helped to a positive close just - of 0.25
cents to $7.99 ½ a bushel for December by Informa's estimate of a 119.8
bushels-per-acre yield for the US crop, below the USDA's figure of 123.4 bushels
Furthermore, it gained help from wheat, and from the impact
of rains in slowing the unusually early harvest.
"Although it is seasonally early for harvest, the talk of
delays because of rain is providing support to futures prices," Allendale's
Paul Georgy said.