PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:58 GMT, Wednesday, 4th Jun 2014, by Agrimoney.com
Evening markets: wheat pulls out of nosedive, But not coffee

What goes down must, occasionally, go up.

Wheat finally broke its longest losing streak in 20 years, rising for the first time in 11 sessions in Chicago, and for only the second time in 20.

Not that the increase was huge. The July contract rose all of 0.3% to $6.14 a bushel, still down more than $1 a bushel over the past month.

And the rebound required a series of fundamental and technical supports.

Russian wrangle

Fundamentally, Russia's deputy agriculture minister, Andrey Volkov, risked the wrath of his senior, Nikolai Fyodorov, by pegging the country's grains harvest at 97m tonnes.

While Mr Fyodorov had put the crop at 100m tonnes, Mr Volkov cited the "condition of the spring grain sowing campaign and the condition of winter grains", besides high debts among farmers, implying constrained use of inputs, for his forecast.

And that was not the only supply concern, to counter an upgrade by the European Commission to its forecast for the European Union soft wheat crop to a heady 137.47m tonnes.

Rains in the US central Plains and Midwest may be proving a little hard for comfort for crops including winter wheat.

'Dreadful hail damage'

While commentators often note that "rain makes grain", they also highlighted on Wednesday that it can cause agricultural challenges too.

"Heavy rain fell overnight from eastern Nebraska through the southwest half of Iowa to northern Missouri where 1.00-3.00 inches and local totals over 5.00 inches resulted in some flooding ," World Weather said.

CHS Hedging said: "Some dreadful hail damage in parts of eastern Nebraska into south western Iowa has been reported.

"We'll await assessed damage before speculating total acres hit."

Demand signs

Staying with potential crop setbacks from weather, some parts of Canada may see frost late this week.

Then, while low prices have turned off the tap of farmer sales, on the demand side, Jordan purchased 100,000 tonnes of optional origin wheat which, while unlikely to come from the US, at least reminded of import.

Algeria is seeking 50,000 tonnes of optional origin milling wheat for September shipment, although it often purchases far more.

And this before getting to the technical factors, and the chart gap dating from three months ago which the July contract seems unwilling to close completely.

Technical support

Indeed, the contract got to a three-month low of $6.10 a bushel, 0.25 cents from filling the gap, only to stage its bounce.

Benson Quinn Commodities said: "Oversold conditions and a slight improvement on short term momentum studies late in yesterday's session attracted short covering in the wheat markets after roughly 20 days working lower."

"Perhaps the trade's respect for the 200-day moving average in Kansas City has also triggered some short covering."

In fact, Kansas City hard red winter wheat for July, having closed just below its 200-day moving average in the last session closed up 0.7% at $7.13 a bushel.

In Europe, Paris wheat for November joined in the rally too, adding 0.8% to E191.25 a tonne, while London wheat for November recovered 0.7% to end at 147.50 a tonne.

Ethanol setback

There was some hope back in Chicago that corn futures might follow suit, and end higher too.

"The corn market is oversold and has traded down to levels that should do a better job of absorbing additional fund selling," Benson Quinn Commodities said.

"Additionally, the cash market tends to be bid well in response to a lack of producer selling."

But hopes of a higher close were dashed by some ill-received US ethanol data.

Although US production rose 11,000 barrels a day to a healthy 931,000 barrels a day last week, inventories soared 761,000 barrels to 18.25m barrels.

'Not seeing strong movement'

The data were "an indication that we are not seeing strong movement" in ethanol supplies, said Darrell Holaday at Country Futures.

"Ethanol stocks are now the highest since late April of 2013. This pressured ethanol values and was not positive for corn."

Ethanol itself for July tumbled 3.2% to $2.122 a gallon.

And, with US weather still broadly benign, corn for July fell And, with US weather still broadly benign, corn for July fell And, with US weather still broadly benign, corn for July fell And, with US weather still broadly benign, corn for July fell 0.4% to $4.56 a bushel.

New crop November corn dropped New crop November corn eased 0.2% to $4.53 a bushel.

Chinese revision

As for soybeans, they had some statistical support when the Commerce Department pegged US imports in April at 6m bushels, below expectations for 10m-12m bushels, and implying less relief from tight domestic supplies.

The figure "suggest the need to import 15.3m bushels a month from May to August to meet the USDA's 90m-bushel US soybean import forecast for 2013-14", said Richard Feltes at broker RJ O'Brien.

Still, the impact of the data was countered by a weakening US cash market, with a switch by processors to rolling basis to August prompting a drop of 5-18 cents a bushel.

On the bullish side, Allendale also noted that China's Ministry of Commerce "has increased its estimate of May soybean imports from 4.85m tonnes to 5.94m tonnes," if seeing a retreat this month to 4.06m tonnes.

Oil leads

Furthermore, elsewhere in the oilseeds complex, palm oil helped by rebounding 1.9% to 2.432 ringgit a tonne in Kuala Lumpur, ending an eight-day losing steam, lifted by bargain hunting.

 Rival vegetable oil soyoil bounced 2.3% to 39.25 cents a pound in Chicago, for July delivery.

"Soyoil is leading the meal and beans higher," Sterling Smith at Citigroup said.

Still, "rallies that are led by the soyoil have a track record of not faring well, and we see no reason for today to be any different," he added.

Soybeans for July edged 0.75 cents higher to $14.82 a bushel, with the new crop November lot shedding 0.3% to $12.17 a bushel.

Coffee cooler

Still, while wheat managed to pull out of its nosedive, arabica coffee remained in investors sell books, closing down 0.6% at 170.20 cents a pound for July delivery, cementing its entry into a bear market this week.

In the absence of evidence of severe drought damage to Brazilian yields, or of frosts this week hitting trees, the market is taking a sanguine view of crop hopes.

Jack Scoville at Price Futures underlined "ideas that the production losses in Brazil from the drought might not be as bad as feared.

Still, the "reality is that no one knows what the production will be with the harvest now well underway. The difference between low end estimates and high end estimates remains very wide".

Hot cocoa

Raw sugar for July fell 0.9% to 17.04 cents a pound, heading towards the bottom of the trading range it has been in for three months.

"There still seems to be a generally bearish sentiment within the trade and a general wonderment as to why the funds are long sugar," said Thomas Kujawa at Sucden Financial.

"Overall it seems we await fresh fundamental news and it seems we will continue to slip sideways to lower."

But cocoa futures for July added 0.6% to $3,088 a tonne in New York, the best close for a spot contract in nearly three years, helped by a strong cocoa butter ratio (ie the comparison between the processing product and raw beans), indicating strong demand from chocolate makers.

Cocoa butter is used to make chocolate bars, with powder used in the likes of biscuits and ice cream.

US confectionery sales jumped 6% over Easter, a bigger rise than expected, led by chocolate products, the National Confectioners Association said on Tuesday.

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