PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:45 GMT, Friday, 16th May 2014, by
Morning markets: grains pull out of dive, but coffee eases

The kind of thing wheat needed to pull out of its sharp decline, led by US markets, was that there were buyers at these price levels after all.

And grain bulls got some reassurance after Egypt's Gasc grain authority, a huge buyer, came out with a tender late on Thursday, for June 20-30 shipment.

With Gasc already having bought some 2m tonnes domestically since last month (albeit at the equivalent somewhere around $400 a tonne, far higher than international values), and having tried to talk down its import needs, that was a surprise to some.

Rival origins

Still, there is a downside to the Gasc tender, in that its announcement later may clarify the premium that US wheat has to other origins, a factor which has been key to this week's tumble, with prices appearing likely to ration too much even supplies of drought-hit hard red winter wheat.

There is talk that even Black Sea wheat, renowned for competitiveness, was not being snapped up.

 "Chatter regarding Black Sea origination not being able to find new crop demand at cheaper values is starting to ramp up," Brian Henry at Benson Quinn Commodities said.

And while the premium that European Union wheat has had over Black Sea supplies "dropping, they haven't been able to secure new crop demand either".

'Good soil moisture'

Meanwhile, on the supply side, threats there appear to be diminishing, with talk of rains next week for drought-hit crops in the western US Plains (albeit that it looks like being too late for many areas).

Meanwhile, the Buenos Aires grains exchange upped by 200,000 hectares to 4.1m hectares its forecast for sowings in Argentina, representing quite a revival from the 3.6m hectares sown last year.

"Good soil moisture, favourable prices and high availability of seeds are among the variables we have noted," the exchange said.

Argentina has historically been a major wheat exporter, although its fortunes have faded over the last couple of years as government-imposed export restrictions prompted farmers to switch to alternative crops, notably barley.

'Dryness continues to build'

Meanwhile, India issued a reminded of its own bumper production, saying that it expected to harvest a record 264.4m tonnes of grain in the year ending next month, cutting the threat of spiralling food prices should the prospective El Nino lead to a weak monsoon, as many fear.

Still, thinking of El Nino, which is also linked to dryness in eastern Australia, MDA noted that recent rains there had not removed the need for further soil moisture.

 "Dryness continues to build in northern New South Wales and Queensland," the weather service said.

While some rainfall is expected next week which "would improve wheat conditions a bit, much more rain will still be needed to sufficiently replenish moisture".

Correction stalls

There was enough concern around at least to halt wheat's decline, with the July contract standing up 0.1% at $6.79 a bushel in Chicago as of 09:40 UK time (03:40 Chicago time), looking for its first close higher in eight sessions.

Kansas City hard red winter wheat, the type under threat from US southern Plains drought, was unchanged at $7.78 a bushel.

Minneapolis hard red spring wheat, for which excessive rain in the northern US has been a problem, slowing plantings, was 0.4% down at $7.52 a bushel for July, with drier weather in its growing areas seen on the way.

As to what happens later in the day may depend on changes to the weather outlook, or indeed sentiment among funds.

Fund dynamics

For fund selling has been seen as a big driver of the drop in grain prices this week.

While in January, when funds stared buying agricultural commodities, prices were significantly cheaper, and weather threats emerging, now values are far higher at a time when some decent harvests are expected.

World corn production is seen at record this year, and world soybean stocks expected to set an all-time high too, according to US Department of Agriculture estimates.

For wheat, harvest time is approaching a period when, with supplies ramped up, prices tend to sag.

"The staying power of the long fund community is being questioned repeatedly," Benson Quinn Commodities said.

'Planting starting to pick-up'

CHS Hedging noted that "long speculators left the market" with talk of spring planting "starting to pick-up in the northern tier where we needed dry weather the most".

And another broker noted the decline in the last session of 2.75 cents in the premium of old crop July corn over new crop December futures, and of 11.5 cents between July soybeans and the new crop November contract, as evidence of fund activity.

"While many are still trying to look for a fundamental catalyst for market action, the most important thing to remember is who is holding what positions," the broker said.

"We know that the speculators have been very long corn and soybeans going into this planting season. 

"We finally got a rather bearish Wasde report and have caught up to the five-year average planting pace."

'Still have to get through pollination'

The broker added that "we don't expect new crop corn to tumble overnight. 

"We still have to get through pollination before we are comfortable assuming what the crop size will be."

And, indeed, corn for July managed a gain of 0.2% to $4.85 a bushel, with some suspicion of profit-taking among shorts for which this week has been a good one, with prices down more than 4%, making it the grain's worst week in 10 months.

There is, after all, a weekend ahead, and the potential for a change to the weather outlook which could dash ideas of a northern farmers playing catch-up with sowings at a key time, with the ideal sowing window passed and prevent plant insurance dates approaching.

Static soy

Among oilseeds, profit-taking appeared evident in Kuala Lumpur palm oil too, although this meant downward movement after gains this week on improved Malaysian exports.

Palm oil for August fell 1.1% to 2,586 ringgit a tonne.

But, back in Chicago, soybeans managed small gains, adding 0.2% to $14.72 a bushel for July delivery, struggling for any kind of direction as investors balance off the thin supplies left over from the last crop with prospects for imports from Brazil, against a backdrop of a record US harvest expected for 2014.

This time, Dalian soybeans joined in the stasis too, easing 1 yuan to 4,338 yuan a tonne at the end of a strong week, boosted by strong demand evident at an auction from state reserves on Wednesday.

Chicago's new crop November lot added 0.3% to $12.21 a bushel.

"November continues to trade $12.10-$12.30 a bushel," CHS noted, adding that "a close below $12.00 a bushel would signal confidence in the 3.635bn-bushel US production estimate" unveiled by the USDA last week.

Coffee retreats

Among soft commodities, Friday began with some profit-taking in arabica coffee, which eased 0.7% to 195.35 cents a pound in New York for July delivery, after its jump of 6% in the last session on a Brazilian crop downgrade for this year's harvest, and concerns over 2015 too.

Raw sugar for July fell 0.3% to 18.15 cents a pound in New York, although it remains up more than 5% for the week, buoyed by downgraded 2014-15 supply talk coming from New York sugar week from the likes of Platts Kingsman and the International Sugar Organization.

Cotton for July added 0.2% to 90.57 cents a pound, shrugging off estimates from the China Cotton Association of a 48% slump to 224,400 tonnes in Chinese imports last month.

This pace was in line with that already this year. Chinese imports for the first four months of the year stand at 985,000 tonnes, down 45% year on year.

Evening markets: wheat futures take a bath on US rain hopes
Coffee futures soar as Brazil cuts harvest hopes
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