PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:47 GMT, Tuesday, 10th Jan 2017, by William Clarke
Soybean futures rally despite threat of big Brazilian supply

Soybean futures pulled off a surprising rally, despite a dearth of supportive news.

The best-traded March contract in Chicago broke decisively back above the 100-day moving average, suggesting that the seven-week lows of last week were a bridge too far.

Jim Sullivan, at Leese Trading Group, said "let's not forget the bean market remains at the intersection of big supplies but also big demand and that was underscored by yesterday's export inspection".

No weather worries

Still, he downplayed any remaining worries over Brazilian dryness, or flooding in Argentina.

"As much as supply side bulls would like to see a South American weather story, there really isn't one," he said.

"This was underscored by Conab's production estimates".

Conab, the Brazilian crop supply agency, forecast national soybean production at a massive 103.8m tonnes, up from an earlier forecast of 102.45m tonnes.

CHS Hedging noted that with rains in South America, "it seems as though Brazil may be making up any losses seen in Argentina, with central and southern Brazil's bean crop looking better than average".

March soybean futures settled up 0.8%, at $10.13 ¾ a bushel.

Stronger dollar weighs on wheat                                 

But there was no such support for Chicago wheat futures.

CHS Hedging saw prices under pressure from a "stronger dollar and profit talking".

March Chicago wheat futures finished down 0.3%, at $4.39 a bushel.

March corn futures settled down 0.7%, at $3.57 ½ a bushel.

Waiting game

Tregg Cronin warned that it was "difficult to get tied up in price action in front of such a large fundamental release".

Thursday will see a slew of supply and demand data released by the US Department of Agriculture.

"Both corn and wheat have found themselves trading at the upper-end of recent trading ranges seemingly waiting for confirmation of supportive news to breakout, or waiting for confirmation of pressuring news to trade back into the range," said Mr Cronin.

Rallying futures

But spring wheat futures, in Chicago, strengthened to an 18-month high.

On Monday the US Department of Agriculture announced 120,000 tonne export sale of hard red spring wheat.

Mr Cronin said the sale "got the attention of traders, and sent most scrambling to determine who was buying panamaxes of spring wheat". 

"The most likely culprit would be China as traders whispered with some thinking another 2-4 panamaxes may have been conducted and could therefore be announced yet this week," Mr Cronin said.

"It's become clear the last several weeks the US is about the only source of high quality, high protein wheat in the world and when importers need it, price is secondary." 

"The issue becomes the Minneapolis wheat market being relatively small compared with Kansas City and Chicago and the area of origin facing one of the most severe winters in many years." 

March spring wheat futures settled up 0.3%, at $5.61 ½ a bushel.

Coffee markets gain

Index fund buying helped lift arabica coffee, with robusta prices tracking higher as well.

Brazilian coffee exporter Terra Forte released its first crop report for 2017-18, seeing arabica production down 13% year on year, at 38.18m 60-kg bags.

Currency markets also supported arabica.

"The Brazil real is tending firmer… which with the still relatively soft nature of the reference prices of the New York market and with Brazil arabica coffee farmers already well sold for their new crop coffees, is retarding the negative pressure of price fixation selling pressure out of Brazil," said I & M Smith.

March arabica coffee settled up 2.4%, at 147.70 a pound.

Terra Forte saw robusta production was seen down 5%, at 9.88m bags.

March robusta coffee futures settled up 1.0%, at $2,162 a tonne.

Tight market

Raw sugar prices also edged up, getting support from the stronger real, and some tightness in the physical market.

"The country is seeing tight supplies and high prices right now," said Jack Scoville, at Price Futures Group.

March raw sugar futures in New York closed up 0.3%, at 20.48 cents a pound.

March white sugar futures settled down 0.3%, at $536.40 a tonne.

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