Bears found more traction among agricultural commodities on
Tuesday, particularly among soft commodities, with coffee and sugar suffering
In Chicago, wheat
managed gains, supported by fresh concerns over the knock-on effects of Ukraine's crisis on its supplies of the grain, although in adding 0.7% to $5.46 a bushel,
the September contract closed well below its highs.
And in New York, cotton
bucked the negative trend, supported by US Department of Agriculture data
overnight showing a further decline, of 2 points to 50% week on week, in the
proportion of the US crop rated "good" or "excellent".
In Oklahoma, the proportion of cotton seen as good or
excellent tumbled 5 points to 60%, as concerns over a dearth of moisture
"Since March 1, the state has received 88% of its normal
precipitation," USDA scouts said.
"Additional moisture is needed to aid in row crop
progression, for run-off [to] fill ponds and lakes, and to alleviate drought
"The hot, dry weather has negatively affected cotton and soybeans in the south west district."
The dryness is spreading again in neighbouring Texas too,
the top cotton producing state, although a factor worth recalling too with
winter wheat sowings on the horizon.
Cotton for December added 0.5% to 64.16 cents a pound, just
shy of its 10-day moving average.
Buy side absent
But other New York soft commodities struggled, including arabica coffee, which tumbled 3.5% to 182.90
cents a pound for September delivery, surrendering its 10-day, 20-day and
100-day moving averages.
The better-traded December lot dropped 3.6% to 185.15 cents
A reluctance by roasters to purchase was hardly supportive
"The buy side of the market is still offering weak
differentials or is quiet," Jack Scoville at Price Futures said.
"They are expected to wait for lower futures prices before
getting interested in buying."
However, on the supply side, CoffeeNetwork dealt a blow to
coffee bulls by sticking with a forecast for Brazil's drought-hit harvest of 50m
Not only is this estimate towards the upper end of recent
estimates, but contrasts with a downbeat assessment from the group, part of INTL
FCStone, last month which laid the groundwork for a step up in futures.
CoffeeNetwork also pegged the forthcoming Vietnamese coffee harvest,
which consists mainly of robusta
beans, at 30m bags (1.8m tonnes), a rise of 2m bags year on year, and again at
the top end of market forecasts.
Commerzbank earlier said: "Most estimates are pitched around
the 1.65m-tonne mark, though there are also those who expect a crop of 1.71m
tonnes, ie at the same level as the record 2013-14 harvest."
The bank added: "We do not expect that the robusta price
will achieve the $2,000-per-tonne mark again in the foreseeable future, the
threshold above which it was trading for most of the time between March and
Robusta coffee for November, the best-traded contract,
actually closed down 0.4% at $1,947 a tonne in London, having earlier set a set
a two-month low of $1,928 a tonne.
Staying in New York, raw
sugar for October dropped 1.4% to 15.47 cents a pound, the weakest close
for a spot contract in six months, continuing to attempt to find a level that
"It seems either the funds have to reach a large net short
position or there has to be substantial off-take to reverse the trend," Sucden
Hedge funds as of Tuesday last week, while having built a
substantial net short position of nearly 18,000 contracts, have scope for a
further 65,000 before challenging the record high.
Even cocoa futures
fell, down 1.7% at $3,204 a tonne in New York for December delivery, as the
selling trend spread to a commodity which, remaining near three-year highs,
offers scope for profit-taking on long positions.
In Chicago, soybeans
could not match these losses. But the best-traded November futures contract ended
down 0.5% at $10.52 ½ a bushel nonetheless.
Sure, there remains talk of a strong US cash market to offer
support near-term and, indeed, September soybean futures added 0.4% to $11.20 ½
However, there was cause for investors to remain cautious on
oilseeds with, after all, palm oil
hitting a fresh four-year low overnight in Kuala Lumpur, depressing rival
vegetable oil soyoil too.
Chicago soyoil for December, the best-traded lot, closed 1.0%
lower at 33.01 cents a pound, hitting a contract low of 32.87 cents a pound
The September contract ended 0.9% down at 32.66 cents a
pound, the weakest finish for a spot lot since July 2009.
Spillover from DDGs
There are those seeing the drop in vegetable oil prices as unsustainable, forecasting demand picking up markedly at current values.
However, the market for the other soy processing product, soymeal, weakened too, by 0.7% to $352.70
a short ton.
"The continual collapse in the distillers' grains [DDGs]
market is starting to grab the attention of the soymeal market," Darrell
Holaday at Country Futures said, with the two rivals as a feed ingredient, and
flagging a more than halving in DDGs prices year on year.
"The missing factor is China who was buying a lot of US DDGs
last year, but is out of the market now," banning US origin over concerns about
genetically modified corn. (DDGs are derived from corn.)
'Losses in the
And weekly Chinese crush data were soft, at 1.49m tonnes
according to analysts, down 8.6% week on week, lowering crush capacity to 51.4%,
down 4.8 points week on week.
Which rang another alarm bell, as Benson Quinn Commodities
noted that "we haven't seen much action from either China or 'Unknown' on new
crop soybeans of late", in terms of orders of US supplies.
CHS Hedging said: "Chinese soybean imports still strong, but
the longevity of the soybean processing sector is coming into question. Processors
are reporting losses in the millions and up."
Besides, on the production side, USDA data overnight
revealed a surprise improvement in the condition of the US crop.
As for corn, it
managed a 0.2% rise to $3.72 ½ a bushel for December delivery, feeling some
pull from wheat, and with results from the ProFarmer crop tour of the Midwest
not proving a knock-out blow for either bulls or bears.
"We don't feel the tour is shedding any new light on the
size of the crop," Mr Holaday said.
"When it is over you will still find two camps. One says
yields are going higher and will be record high 171-176 bushels per acre on
"The other camp will believe that USDA numbers last week [167.4
bushels per acre] are high enough and will not go higher."
Wheat price dynamics
Back in wheat, one
notable trend was the outperformance of Minneapolis spring wheat, which closed
up 1.4% at $6.16 ½ a bushel, just below its 10-day moving average.
Concerns have been growing over the condition of the US
crop, which thanks to wet conditions some believe has suffered pressure from
fungal disease, leading to high levels of vomitoxin, a toxic residue.
Forecasts of US rain ahead are doing little to assuage such
In Europe, while Paris milling wheat for November added 0.5%
to E172.50 a tonne, London feed wheat for November dropped 0.2% to £121.10 a
tonne despite a weak pound, a sign of the weight of lower quality supplies.