Has Friday come to mean "sell day" in trader language?
Last week ended on a bearish note, after the US Department of
Agriculture, in its first estimates for world crop supply and demand 2014-15, forecast
supply rebuilds from the likes of a record global corn harvest.
This week, well, the ripples from the Wasde report were
still seen as in part to blame for a negative mood, in encouraging funds to reconsider
the positive attitude they have had towards agricultural commodities this year.
Certainly, there is been little in the last week to make
investors believe prospect for crop supplies have got any weaker.
'Keep prices under
Indeed, the US weather is looking more benign for growers.
If this season has been marked by two much rain in the north
of the US, slowing plantings, and too little in the south, stressing winter wheat, that situation is beginning to
"Rains are expected in the next five days across the winter
wheat belt," CHS Hedging said, adding that this "should keep Kansas City hard
red winter wheat prices under pressure", this being the variety grown in the drought
hit southern Plains.
Not, it must be said, that the rains should be overstated,
with MDA, for instance, talking more of "light showers" across some areas, and
saying that "moisture will remain short in south western areas".
'Charts look terrible'
Still, it was hardly the kind of situation to encourage
funds to stick with long bets in grains.
"Charts look terrible," Richard Feltes at Chicago broker RJ
O'Brien said, adding that "funds are running out of reasons to stay long".
Indeed, it had been "sobering week in corn and wheat, with
both tracking below their 50-day moving average".
In fact, Kansas City hard red winter wheat fell below its
50-day moving average on Friday for the first time in three months in dropping
1.4% to end at $7.67 ¾ a bushel.
Chicago soft red winter wheat, the world benchmark, actually
fared not so badly, in dropping 0.6% to $6.74 ¼ a bushel for July delivery.
The results of the latest tender by Gasc, the Egyptian grain
authority, at least showed soft red winter wheat getting back into the orbit of
competitiveness, being offered by Bunge at $282.87 a tonne - below the winning Ukraine
offer, at $289 a tonne, excluding shipping.
The US offer was down 6.3% in two weeks, in line with the
drop in futures, unlike the Ukraine offer, which was $3 a tonne more expensive
than as fortnight ago.
Minneapolis hard red spring wheat actually fared worse,
falling 2.0% to $7.39 ¾ a bushel for July delivery, ending below its 50-day
moving average for the first time in three months, undermined by improved
weather conditions in the northern US for sowings.
To expand on the better sowing weather, Benson Quinn Commodities
said that "outside of the potential for thunderstorm activity in eastern North Dakota
and western Minnesota early next week, forecasts are offering a decent
opportunity to make planting progress in northern regions.
"Temperatures are expected to moderate [upwards] towards
normal, which should allow for the much-anticipated emergence of the crop as
morning temperatures in the low 30s Fahrenheit haven't offered much optimism."
CHS Hedging said that "weekend planting progress looks to
improve over the weekend in North Dakota, Minnesota, Wisconsin and Michigan.
"The best chance for fieldwork looks to be in the next five
days, with rains of more than an inch moving into the western Corn Belt through
May 21, and then back into the northern Corn Belt by May 26".
This is obviously a help for corn plantings as well as wheat ones, with sowings in the four
states (North Dakota, Minnesota, Michigan and Wisconsin) held up particularly
by the poor weather, contrasting with strong progress in the Corn Belt proper.
In fact, investors expect the weekly US crop progress
numbers on Monday to show corn plantings 70-75% complete (depending on who you
talk to), up 21-26 points week on week.
And "even if updates fall short of expectations on Monday,
the trade is mindful that largely open weather next week will allow for rapid
catch-up" in sowings, Mr Feltes said.
Still, there are at least signs of demand to slow corn's
fall, with South Korean buyers unveiling orders late on Thursday.
And the Ukraine Agribusiness Club stoked doubts about spring grain sowings in Ukraine, which has grown into a huge corn exporter.
Corn for July closed 0.2% down at $4.83 ½ a bushel.
Signally, the December contract outperformed a touch, ending
up 0.1% at $4.81 a bushel, amid talk of funds unwinding bull spreads – ie,
closing long July contract-short December bets.
And that was also a factor evident in the soybean pit, where the new crop
November contract closed up 0.3% at $12.21 ½ a bushel, while the old crop July
lot ended down 0.4% at $14.65 a bushel.
Still, is there some positioning going on ahead of the fund roll
from nearby contracts into later ones?
Mr Feltes noted that the "fund roll out of July contracts lies
ahead—a development which pressured old/new spreads last year, when soy basis
levels were tracking well ahead of today's".
The case for new crop soybeans was also helped by the
announcement of an export sale by the US of 180,000 tonnes of new-crop soybeans
Furthermore, at New York broker Jefferies Bache, Anne Frick
said that "it may be that November soybeans, being deeply discounted, are
looking more attractive to speculators.
"The recent history of dry summers and sub-par yields might
also get speculators' attention, especially considering dry pre-season soils in
Not that Ms Frick was too convinced herself, saying that "the
indicators to date suggest a greater likelihood of good US yields in 2014",
with El Nino years, for instance, tending to promote row crop results.
'Export market is
Among soft commodities, arabica
coffee in particular found itself under the cosh, closing down 6.0% at
185.05 cents a pound for July delivery.
That left the contract pretty much where it started the
week, despite its jump on Thursday after Conab cut its forecast for Brazil's
crop, and Judy Ganes-Chase forecast prices heading back to 300 cents a pound.
"Little follow-through buying was seen in after yesterday's
price run-up," said Sterling Smith at Citigroup.
"For the moment the export market is well supplied," and
some "speculative profit taking" had been in evidence.
'Exports very strong'
At Price Futures Group, Jack Scoville noted that "Brazil
exports remain very strong as farmers have been selling supplies from the last
crop", if adding that report suggest that "coffee is mostly sold now.
"If so, it could be very hard to find coffee in Brazil once
the harvest is complete."
However, in sugar,
while analysts have curbed estimates for supplies in 2014-15, there is no thought
yet of a market squeeze, given five successive years of surpluses.
Raw sugar for July closed down 1.6% at 17.91 cents a pound.