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Morning markets: coffee prices jump. But grains retreat anew

Month-ends are often associated with retreats in grain markets, as funds withdraw cash to pay clients, bonuses etc.

And investors need little encouragement in the current environment to put another dent in prices, with the weather forecasts continuing to look benign for next week, after a current dry spell.

"Weather is non-threatening as forecasts add some western Corn Belt moisture 8-to-10 days out," CHS Hedging said.

For corn, "temperatures are expected to remain moderate as the last 25% of the crop begins to pollinate".

Benson Quinn Commodities said: "With rains in outlook next week for north western Midwest, the direction the weather is taking us is lower."

Yield momentum slows

For soybeans, "as long as the weather plays along and the forecasts continue to avoid too much in the way of heat and keep some rain in the forecast a new life-of-contract low in the November futures is quite attainable", Sterling Smith at Citigroup said.    

Still, there is some idea that price losses are becoming harder, discouraging producer selling while encouraging buying and with US wheat, after all, notably cheaper, excluding shipping, than Russian supplies at Wednesday's Egyptian tender.

And the drier weather for now has at least slowed the momentum of ever-rising US yield forecast.

"I don't know that anyone is concerned about the crop taking a significant step backwards despite drier conditions, but trying to convince people to get on board with significantly higher production estimates is getting tougher," Brian Henry at Benson Quinn Commodities said.

Data later

Direction later may well depend largely, besides on updated US weather forecasts, on US export sales data, although there is some high expectation built in here, for soybeans especially.

"Trade is looking for another big export sales total in soybeans and soymeal," Richard Feltes at RJ O'Brien said, adding that this could "trigger early algo buying that, as we witnessed early this week, can fizzle if weather maps turn wetter".

In fact, the market is expecting soybean export sales of 100,000-200,000 tonnes for old crop, and 800,000-1.1m tonnes for 2014-15, of which some has of course been pre-announced through the US Department of Agriculture's daily alerts system.

For soymeal, 50,000-100,000 tonnes of export sales for 2013-14 and a chunky 500,000-650,000 tonnes for 2014-15 are forecast.

Dollar factor

Still, a factor counting against US exports has been the strength of the dollar, which has strengthened by 2% this month against a basket of currencies to hit a 10-month high in the last session.

The so-called "tapering" of US monetary easing is being viewed as "favourable for the dollar Index which is actually negative for dollar denominated commodities like grains", making them less affordable to buyers in other currencies, one broker noted.

Dollar strength "may be playing a part in the current grain weakness".

Markets allowed some scope for disappointment in export data, with the November soybean contract down 0.3% at $10.78 a bushel in Chicago as of 09:30 UK time (03:30 Chicago time), while soymeal for December eased 0.2% to $347.80 a short ton.

Corn eases

Corn for December fell 0.7% to $3.69 a bushel, some 1% from a contract low, despite the positive US ethanol data on Wednesday which raised some hopes for demand.

Output was 954,000 barrels a day last week "and if this rate is sustained it equals an estimated 5.111bn bushels annual use" of corn, CHS Hedging said.

The USDA has factored in 5.05bn bushels for 2013-14.

US weekly export sales data later are expected at 300,000-450,000 tonnes for 2013-14, and 500,000-800,000 tonnes for new crop.

'Rarely-seen volatility'

Meanwhile, wheat, the leader in the last session, reversed to stand 0.3% down at $5.25 a bushel in Chicago for September delivery.

Kansas City hard red winter wheat for December was down 0.2% at $6.16 a bushel, at least nudging its premium to Chicago soft red winter wheat back over $0.90 a bushel.

US wheat export sales last week are expected at 350,000-550,000 tonnes for 2014-15, in line with the 443,163 tonnes the previous week, with the latest orders by Nigeria to late to count in today's data.

As regards the US winter wheat harvest, it seems to be swelling as it heads north, "as yields and quality seem to be outstanding, with elevators feeling the full brunt of poor rail performance as some elevators go full or will next week without rail freight," CHS Hedging said.

For Europe, however, rain damage to quality remains the issue.

"Physical basis shows a rarely-seen volatility as a result of concerns over quality," Agritel said, highlighting also the somewhat shifting sands of what grain is acceptable to deliver against Matif futures.

Strong coffee

Among soft commodities, arabica coffee got off to a strong start, soaring 2.3% to a two-month high of 186.60 cents a pound in New York, for September delivery, as investors reacted to Terra Forte's downgrade late last night of Brazil's harvest hopes.

The coffee exporter estimated the crop at 45.8m bags, down 1.6m bags from its February forecast, citing drought damage, and warned over next year's crop too, saying trees were losing most of their leaves.

Furthermore, as regards next year's crop, "there is continued risk of premature flowering in some areas, which is something the next crop does need to have happen and as it may be difficult for the trees to recover from this", Citigroup's Sterling Smith said.

The contract got some technical help too, blasting through its 75-day moving average for the first time since mid-May, and returning above its 100-day moving average too.

London robusta coffee for September was 1.3% higher at $2,063 a tonne.

PM markets: Russia fears lift wheat. Brazil woes help coffee
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