PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:24 GMT, Friday, 9th Jun 2017, by Mike Verdin
PM markets: cocoa soars as pound dips, but real hurts sugar

So, the US Department of Agriculture's Wasde crop report was not exactly a fillip for bullish sentiment, as reported elsewhere on

"The USDA provided a lot of numbers and not one of them could be seen as supportive" to grain prices, said Darrell Holaday at broker Country Futures.

"It does not mean that they were all bearish, but there was not one number that inspired any buying."

So it was down largely to weather worries to give futures a chance of a positive close.

"The market faded off of the report, but the midday GFS [weather model] was slightly drier than the morning run and that has supported the market on price breaks," Mr Holaday said.

Winer wheat misses out

Indeed, corn futures for July closed up 0.6% at $3.87 a bushel, the contract's best close in three months, after another volatile session, albeit in lower volumes than the last two.

And soybean futures for July added 0.4% to $9.41 a bushel, less affected by US weather woes, but gaining extra support from a separate announcement by the USDA of the sale of 201,000 tonnes of US crop to an "unknown" import destination for this season.

That cheered investors, given that "unknown" was likely considered to be China, for which there have been worries of cancellations of US import orders, or at least a switch in fresh business to South America.

Winter wheat did crumble under the weight of its extra stocks with dry US weather, after all, beneficial for harvest of the crop.

But spring wheat, under threat from northern Plains drought, kept up its headway, adding 0.4% to $6.06 a bushel for July delivery, the best finish for a spot contract since July 2015.

Cotton falls

Still, on the losing side, cotton underperformed even winter wheat, dropping 1.1% to 75.69 cents a pound in New York for July delivery, a two-month closing low, after the Wasde failed to lift the estimate for US exports in 2016-17 from 14.5m bales, as some commentators had expected.

And the forecast for US export in 2017-18 was downgraded by 500,000 bales to 13.5m bales, "as higher anticipated foreign production is expected to reduce global import demand".

Indeed, the estimate for world production in the new season (which will start in August) was raised by 1.5m bales to 114.7m bales on "higher estimated planted area" in China, Mexico and Pakistan.

"Chinese officials are reporting a moderate increase in planted area, specifically in Xinjiang and Hebei provinces with favourable weather conditions across cotton regions," the USDA said, lifting its forecast for China's harvest by 500,000 bales to 24.0m bales.

And the resulting upgrade of 670,000 bales to the forecast for world cotton stocks at the close of 2017-18 was deemed downbeat for prices.

Still, the new crop December contract lost a more modest 0.8% to 72.49 cents a pound, lacking the imminence of the expiry process, like the old crop July contract.

'Wet weather hampered crushing'

Raw sugar put in a weak performance too, to end an otherwise solid week, settling down 0.5% at 14.27 cents a pound, undermined by fresh weakness in the real, which dropped 0.7% against the dollar, so weakening the value in dollar terms of assets in which Brazil is a big player.

The fall came despite a market survey by Platts showing that investors expect data early next week from Unica on the cane crush in Brazil's key Centre South region to show a 9% tumble year on year in the second half of May.

"Wet weather has hampered crushing activities," said Platts Kingsman analyst Claudiu Covrig, adding that ATR, the concentration of sugars in cane, has "still to recover".

Still, with more cane being turned into sugar rather than ethanol, output of the sweetener is seen taking a smaller drop, by 6% to 1.59m tonnes.

Iced coffee?

However, arabica coffee fared better, nudging 0.2% higher to 126.55 cents a pound in New York for July, protected from the falling real and Brazilian harvest pressure by some cold weather concerns.

"The weather is still cause for attention of market players," said the Conselho Nacional do Café producers' group, flagging a forecast from Somar Meteorologia that the "advance of a mass of polar air over the weekend, between the northern Rio Grande do Sul and the west of Santa Catarina, will decrease temperatures".

Further north in the key coffee-growing state of Minas Gerais, plantations above 1,000m altitude in the region of Pocos de Caldas will see minimum temperatures of 0-2 degrees Celsius, although a foecast wind "reduces the possibility of frost", the CNC said.

Hot cocoa

Still, cocoa fared best, rocketing 4.6% to £1,605 a tonne in London for July delivery, reflecting largely a boost from weaker sterling, after the UK general election resulted in a loss in overall majority for the Conservative Party, and signalled the potential for political trouble ahead.

Nonetheless, there was more to the rise than currency, with New York cocoa futures for July gaining 2.0% to $2,020 a tonne

Jack Scoville at Price Futures noted that "the harvest is basically over for cocoa in West Africa and this has helped relieve selling pressure on futures.

Also, "traders look for demand to improve as lower prices filter down to the retail level".

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