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Indonesia woes lift coffee, but Ukraine fails to boost wheat

There was cause to think wheat prices might rise in Europe, even in the absence of an influence from Chicago markets, with Ukraine troubles appearing only to get worse.

Petro Poroshenko, the Ukrainian president, accused Russia of "direct and unconcealed aggression" against his country as Ukrainian troops lost further ground to separatist forces.

Valery Heletey, Ukraine's defence minister, went even further, saying that "a great war has arrived at our doorstep - the likes of which Europe has not seen since World War Two.

"Unfortunately, the losses in such a war will be measured not in the hundreds but thousands and tens of thousands."

Wheat prices have been acting somewhat as a barometer for Russia-Ukraine tensions, given the region's status as a large source of competitively priced supplies.

'Competition from the Black Sea'

As an extra boost to wheat prices in Paris, the euro continued its gentle decline, dropping to E1.312 to $1 at one point, its lowest in nigh on a year against the greenback.

A weak currency makes eurozone exports, such as grain, less expensive to buyers in other currencies.

"The euro remains on a downward path and provides support to the wheat price from Europe thanks to a better competitiveness on the world stage," Agritel, the Paris-based consultancy said.

"However there is a competition with the wheat from the Black Sea area."

Russian prices

In fact, wheat is being offered at the French port of Rouen at E174 a tonne, less than $230 a tonne, but that is for 11% protein supplies.

Buyers appear keener on the 12.5% protein supplies offered from Russia, whose exports are soaring, allowing prices to rise a touch, by $1.50 last week to $247.50 a tonne, according to SovEcon.

"The price growth is supported by domestic and export demand," the analysis group said.

Ikar quoted Black Sea prices for 12.5% protein wheat at $244 a tonne, up $1 a tonne, week on week.

Whatever, the ideas is the same.

 And farm giant Ros Agro highlighted where domestic demand might be needed as it unveiled a jump in meat profits, backed by higher pork production and volumes, and unveiled further expansion plans.  

'Still uncompetitive'

The trouble with lower quality supplies is that there are plenty of them, a factor which many investors believe, for instance, bodes ill for the feed grain traded in London.

"UK feed wheat is still uncompetitive against competing exporters into most destinations, although the odd small cargo has been sold across to Ireland in the last couple of weeks," traders at a major European commodities house said.

"Recent business from the Ukraine suggests that UK prices would have to be close to 100 a tonne ex-farm to gain any business in the wider market."

However for now, "very little is being sold from the farm and that is holding prices well above this level".

London November feed wheat closed down 0.2% at 121.55 ($202) a tonne in London.

Paris feed wheat for November dropped 0.4% to E176.25 ($231) a tonne, on trade thinned by the closure of US markets for Labor Day.

'Struggling to buy seed'

Rapeseed dropped too, although less severely, by 0.1% to E323.50 a tonne in Paris for November delivery, offered some support by a firm spot European cash market.

"Crushers are running close to capacity at present and merchants are struggling to buy seed to cover earlier sales" of processing products, the commodities house said.

"Therefore prices close to the November value are available at the moment and may remain for a week or two."

Elsewhere in the commodities complex, soybeans managed to close flat at 4,591 yuan a tonne on the Dalian exchange in China, the top importing country of the oilseed.

Coffee hots up

It took something more solid in data terms, to give investors the confidence to take prices significantly higher, which they did in London-traded robusta coffee.

The best-traded November contract jumped 1.3% to $2,081 a tonne, its third best finish in the past three months, and extending a recovery from a low of $1,928 a tonne reached two months ago.

The catalyst was another month of poor weak exports from Indonesia's main coffee growing region, Sumatra, down 32% in August to 21,986 tonnes, government trade data on Monday showed.

The region's cumulative exports are down 49% in 2014 so far, boding ill for supplies of the bean, given that Indonesia is, the third-ranked robusta producer, after Vietnam and Brazil, although poor weather has caused a succession of harvest downgrades.

Elsewhere among soft commodities, cocoa for December dropped 0.4% to 2,009 a tonne, undermined by the International Cocoa Organization's improved supply estimate, unveiled late on Friday.

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