If Washington's first report on the world grain, oilseed and
cotton balance sheets in 2014-15 was the big story of the day for agricultural
commodity investors, it wasn't the only one.
In fact, while grain markets saw some pretty strong price
moves on the day, notably in new crop corn, the biggest moves were witnessed
among soft commodities, where coffee futures took a dunking.
for July, the benchmark contract, plunged 5.9% to 183.90 cents a pound, the lot's
lowest in a month.
'Not be as bad as
The selling was partly based on ideas that Brazil's production
potential may not have been harmed as much as some investors believe.
Agrimoney.com on Thursday reported talk of a decent start to
Brazil's robusta coffee harvest although it must be
restated that this is still early days, and the carryover to arabica is not exact.
Furthermore, it is not just Commerzbank that is taking a
sanguine view of production prospects, with Jack Scoville at Price Futures
noting comments from a Brazilian exporter "that losses in the country might not
be as bad as feared".
At Citigroup, Sterling Smith said "yesterday's ideas of lower
damage and better harvest weather are giving some pressure to the market".
Key price point
Certainly, Brazil export data released by Cecafe on Friday
were firm, showing shipments of 2.73m bags of green coffee last month, up from 2.52m
bags in March, although that likely of course represents sales form the country's
large stockpiles to roasters wanting insurance against a poor crop.
Whatever, technical factors played into bears' hands, with
the contract's decline gaining strength after it broke decisively below its
50-day moving average underneath which it closed for the first time in nearly
"The July futures do look primed to test the support at the
183.00-cents-a-pound level," Mr Smith said, adding that "where we finish the
day and the week will be of paramount importance" technically.
In fact, the contract got no lower than 183.35 cents a
pound, which may offer some hope to bulls that the price drop will not set a
Robusta coffee was dragged lower too, ending down 1.9% at $2,093
a tonne for July delivery.
And it was not as if investors proved much more positive
towards other soft commodities, with cocoa
ending down 1.1% at $2,864 a tonne in New York, a fourth successive negative
close, if remaining above the three-month low set in the last session/.
"Prices have moved lower on reports of good mid-crop
production in West Africa," Mr Scoville said, adding that "mid-crop harvest
results imply a good-to-very-good mid-crop in West Africa and bigger-than-expected
Raw sugar remained uninspired, ending down 0.4% at 17.20
cents a pound for July.
"We continue to drift sideways in light volume and it seems
like we haven't really moved since March," Sucden Financial said.
The one soft commodity which did manage gains was cotton, new crop at least, which ended
up 0.2% at 83.71 cents a pound, back over its 10-day moving average.
Which brings us to the US Department of Agriculture and its
first forecasts, in the Wasde report, for 2014-15 balance sheets for the likes
of cotton, corn, soybeans and wheat.
For cotton, the changes were not all bullish the USDA
lifted its estimate for domestic stocks at the close of 2013-14 by 300,000
bales to 2.8m bales citing weaker hopes for exports. And old crop July cotton
fell 0.7% to 92.36 cents a pound.
But for 2014-15 it forecast a relatively small rise in
inventories, of 1.1m bales. Relative, that is, to the 1.6m bales it suggested
at the USDA's Outlook conference in February.
Still, the Wasde's main impact was on corn, for which the report spelled a sharp drop in prices.
USDA corn forecasts, change on previous estimate, and (on market expectation)
World stocks, end 2013-14: 168.42m tonnes, +10.4m tonnes, (+11.m tonnes)
World stocks, end 2014-15: 181.73m tonnes, n/a, (+22.32m tonnes)
US stocks, end 2013-14: 1.146bn bushels, -185m bushels, (-168m bushels)
US stocks, end 2014-15: 1.726bn bushels, n/a, (+54m bushels)
Not that the reaction was immediate, with one of the numbers
that investors first turned to, that for US corn stocks at the close of 2013-14,
in fact positive, in showing a downgrade of 185m bushels to 1.15bn bushels, a bigger
cut than investors had expected.
The USDA raised expectations for US exports this season, and
use of the grain in making ethanol too.
"The market reacted positive in the first initial moments
after the report," Darrell Holaday at Country Futures said.
But once the market digested the entire report, and world
numbers, the market gave up ground," Mr Holaday added.
On the world corn balance sheet, the USDA hiked its estimate for stocks at the close of this season by more than 10m tonnes, citing revisions
to previous seasons, and a higher forecast for some 2013-14 harvests too,
And, with US production seen at a record this year, despite
lower plantings, and world stocks seen ending 2014-15 at 181.73m tonnes the highest
in 15 years and far higher than investors had expected futures retreated
Chicago's July contract closed down 1.7% at $5.07 ½ a
bushel, while the new crop December lot dropped 2.5% to $4.98 ¾ a bushel.
Nor may corn have that much hope of redemption, in bullish
Long positions in corn appear "vulnerable unless crop is
threatened, which is unlikely before late June", Richard Feltes at RJ O'Brien
Corn's decline dragged on fellow grain wheat, even though the Wasde was not nearly as downbeat for this
USDA wheat estimates, change on previous and (on market forecast)
World stocks, end 2013-14: 186.53m tonnes, -0.15m tonnes, (+0.58m tonnes)
World stocks, end 2014-15: 187.42m tonnes, n/a, (+2.89m tonnes)
US stocks, end 2013-14: 583m bushels, unchanged, (-5m bushels)
US stocks, end 2014-15: 540m bushels, n/a, (-13m bushels)
Indeed, in pegging the US winter wheat crop at 1.40bn
bushels, a drop of 9% year on year, it undershot market forecasts by some 70m
The USDA blamed the lowly forecast on damage particularly to
drought-hit hard red winter wheat, but also to the soft red winter wheat crop.
That said, the Wasde also came in with a world wheat
production forecast which, at 187.42m tonnes, was nearly 3m tonnes above market
"The world wheat numbers were negative with ending stocks
for the current year at 186m tonnes and next year's ending stocks at 187m tonnes,"
Mr Holaday said.
Still, this is based on assumptions of strong harvests in
the likes of China, Europe and India.
Wheat is likely to "hold value until trade knows more about
2014 northern hemisphere growing conditions", Mr Feltes said
But it didn't manage it on the day, ending down 1.7% at $7.22
½ a bushel in Chicago for July delivery, below its 10-day moving average.
Kansas City hard red winter wheat for July dropped 1.7% to
$8.28 ½ a bushel, with US contracts for once underperforming their European
peers, which have remained relatively unmoved by US production setbacks.
Paris wheat or November closed unchanged at E207.25 a tonne.
New vs old
their newly-rediscovered position as leader in Chicago, adding 1.2% to $14.87 a
bushel for July.
USDA soybean estimates, change on previous and (on market forecast)
World stocks, end 2013-14: 66.98m tonnes, -2.44m tonnes, (-2.79m tonnes)
World stocks, end 2014-15: 82.23m tonnes, n/a, (+1.89m tonnes)
US stocks, end 2013-14: 130m bushels, -5m bushels, (-4m bushels)
US stocks, end 2014-15: 330m bushels, n/a, (+23m bushels)
The USDA trimmed its forecast for stocks at the close of
this season by 5m bushels to 130m bushels a small downgrade, but one which
left the US looking at its first stocks to use ratio of 3.8% - the lowest on
records going back to the 1960s.
That said, new crop numbers were not so bullish, with US
stocks seen recovering to 330m bushels in 2014-15, when world inventories will
hit a record high of 82.23m tonnes.
New crop November soybeans lagged, but still gained 0.2% to
$12.26 ¼ a bushel, with talk of some support from unwinding of long corn-short