PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:04 GMT, Wednesday, 28th May 2014, by Agrimoney.com
Shadow eases over grain markets. But coffee extends slide

Selling in grains showed signs of slowing - although whether that heralds a sustained bounce, of course, is entirely a different matter.

Wheat for July stood lower in late deals in Chicago, on course for its 14th lower close in 15 sessions.

But the decline was by a modest 0.4% at $6.38 a bushel, with Kansas City hard red winter wheat, the type which has been stressed by US southern Plains drought, down 0.2% at $7.36 a bushel.

Corn was actually higher, by 0.4% to $4.71 a bushel for July, and 0.6% to $4.68 a bushel.

Winter wheat improvement

Not that there was too much bullish talk around, given growing confidence in US crops, with northern areas drying up to enable a catch-up in sowings, while southern regions receive much-needed rains.

Data overnight showed the first improvement since November in the condition of US winter wheat, while farmers caught up with a stack of corn plantings too.

And this when the crisis in Ukraine appears to be stabilising, if not receding, an extra reason to withdraw risk premium.

Drought is expected to retreat in the former Soviet Union this week too.

'Technically oversold'

"The most supportive factor for corn and wheat is the fact that they are technically oversold with stochastics around 10," said Darrell Holaday at Country Futures.

At Chicago-based RJ O'Brien, Richard Feltes flagged the calendar as an extra reason to doubt the likelihood of fund purchases.

"Managed funds are unlikely to extend longs ahead of month-end on Friday -especially given successive new lows in corn and wheat futures, and the failure of the mid-May soy rally to follow through on the upside."

Furthermore, the wheat market may be within the pull of harvest pressure, with European Union combines at least expected to begin rolling early, with improved yield results expected in the likes of the UK.

In Asia, China is already reaping what is expected to be a decent crop.

Demand signs

In fact, Mr Feltes added that "with benign-to-favourable US weather, easing former Soviet Union tension and the approach of fund roll and month end, it's difficult to identify factors that might drive [prices] higher other than tight farm holding, induced by increases in US row crop basis levels".

But maybe a lack of producer selling played a part.

And, as an extra prop, there were signs of demand around, with Jordan purchasing 100,000 tonnes of wheat at tender, optional origin, and Israeli buyers purchasing 108,000 tonnes of corn and 40,000 tonnes of feed wheat - albeit with some of the former, and all the latter, thought to be coming from Black Sea suppliers.

The wheat was purchased at about $236 a tonne c&f, likely significantly cheaper than the US could supply.

Still, back on harvest talk CHS Hedging noted that "early harvest reports from Texas show protein between 13-14% with yields of 10-12 bushels per acre".

And perhaps the most bullish factor for grain markets is exactly the dearth of supportive talk around, with apparent unanimity at a bearish outlook, which could be perceived as a contrary indicator.

China talk turns more bullish

Soybeans remained the safest bet in Chicago for bulls, adding 0.6% to $14.97 a bushel for July delivery, and 0.3% to $12.42 a bushel for the new crop November contract.

Concerns over Chinese imports alive in the last session, with talk of fresh cancellations of orders from Brazil, eased a bit with the announcement of 110,000 tonnes in sales of US soybeans to Chinese importers, for 2014-15.

The Philippines purchased a healthy 172,000 tonnes of US soymeal, also for next season.

And, back in China, there was a report of a 10% drop in soybean plantings in Heilongjiang, the largest producing province, reflecting a shift to corn.

US soy imports

The tightness in the US balance sheet also continues to concern investors, although there are signs of imports from Brazil picking up to ease the squeeze a touch.

"At a lock on the Mississippi River, there were more barges going north with soybeans than south last week," Country Futures' Mr Holaday said.

"If you were wondering if we have truly seen soybeans imported, there is your confirmation."

Jefferies Bache flagged talk of boats filled with South American soybeans arriving in the US ports of Wilmington and Norfolk, with a further seven cargoes in the pipeline.

However, "this is probably more important psychologically for the US balance sheet" than actually significant in terms of easing the supply squeeze.

Sugar recovery

Among soft commodities, raw sugar for July added 0.5% to 17.11 cents a pound, with investors not proving brave enough to push the sweetener out of the bottom of the trading range it has been in for three months.

Indeed, at Citigroup, Sterling Smith said that "the market has become oversold on a technical level and there are renewed worries about El Nino developing which could adversely affect Brazilian harvest efforts as well as production".

The El Nino often brings with it wetter than normal weather for Brazil's key Centre South production region.

At Price Futures, jack Scoville also noted reports that the Indian monsoon "seems to be getting off to a late start and this development will have to be watched", with India the second-ranked sugar producing country, and top consumer.

Still, he also noted that "the market needs demand, too, and there has not been much demand news", a factor sugar bears state as mitigating against a sustained recovery in sugar prices.

Sucden Financial said that "end users are sitting on plentiful stocks waiting for values to get to bargain levels before adding to them".

Coffee out of favour

However, robusta coffee for July slumped 3.9% to $1,907 a tonne in London, a three-month closing low, weighing on New York arabica coffee for July, which dropped 1.8% to 176.15 cents a pound.

The slump in robusta coffee reflected an estimate from the USDA office in Hanoi of a record Vietnamese crop this year, and all-time high exports too.

The production estimate was "larger than expected", Citigroup's Sterling Smith noted.

Still, he added that "this market has become oversold and seeing some bargain hunting here should be expected".

Some other analysts were more upbeat too, with Mr Scoville highlight talk of a decline in offers from Vietnam, the top robusta producing and exporting country.

"Traders look for more robusta in the market, but there is talk of less offer from Vietnam as the export pace has been strong lately and as producers are worried that El Nino could hurt the next production," he said.

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