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US supply scramble lifts soy. Indonesia woes boost coffee

Anyone with soybeans from the last harvest left in the barn saw them grown in value again on Thursday.

Chicago September soybean futures rose for a sixth successive session, this time by 1.5% to $11.36 a bushel, the contract's best finish in nearly a month, and closing over its 40-day moving average for the first time since June.

The cause is a clamour for soymeal, which for September jumped 2.8% to $413.80 a short ton, the contract's best finish since June.

'Aggressively bidding'

"Profitable pork and poultry sectors are having difficulty finding old crop soymeal offers as more [soybean crushing] plants shut down until harvest," Richard Feltes at Chicago broker RJ O'Brien.

Soybean prices were rising "effort to draw remaining tightly held old crop beans into depleted pipeline".

On the US cash market, Decatur, Illinois soybean basis has reached $2.50 a bushel over November futures, "fully $0.50 a bushel over last year's highs while CIF [export] soybean basis is $0.90 a bushel over early August highs last year", Mr Feltes said.

At Country Futures Darrell, Holaday said that soybean processors are "still aggressively bidding for spot soybean delivery for fulfil needs until they shut down sometime in the next 30 days.

"Bids $2.00 a bushel over the November contract are very common, which equates to $12.40-a-bushel soybeans."

Export sales

There was enough strength, just, to carry over into the new crop space for which fundamentals are, of course, completely different, with the US seen on course for a record harvest, by a distance.

November soybeans closed all of 0.25 cents a bushel higher at $10.38 a bushel, helped by a 0.7% rise to $346.50 a short ton in December soymeal.

Strong US export sales helped too, at 1.42m tonnes last week for 2014-15, well ahead of market expectations, and, signally, including nearly 950,000 tonnes bought by China.

An apparent dearth of orders by buyers from China, the top importer, had spooked markets.

Weak export data

Still, soybeans' Chicago grain peers were going to have to rely on other sources of strength if there were to close higher, with US export sales soft for corn, at 719,300 tonnes for new crop, and well below forecasts for wheat, at 209,200 tonnes.

The wheat figure was "down 38% from the previous week and 62% from the prior four-week average", the US Department of Agriculture said, besides being less than half the volume some investors had expected.

It was particularly low for hard red winter wheat, the type traded in Kansas City, which indeed saw a revival in its performance against its Chicago soft red winter wheat and Minneapolis spring wheat go into reverse.

Indeed, it was a negative 25,000 tonnes, reflecting cancellations by Brazil, which has reinstated a 10% tariff on orders from outside the Mercosur trading block.

Canada data

Still, wheat gained support in part from Statistics Canada data estimating the Canadian crop at 27.7m tonnes 800,000 tonnes below market expectations.

Not all investors were quite so convinced of the bullishness of that data, with Statistics Canada having a reputation for conservative estimates at this time of year, and such a harvest not a bad one.

"Not another banner year, but good wheat production nonetheless," Benson Quinn Commodities said.

Still, the concerns over weather remain, both in Canada and the northern US, raising concerns over the quality of the crop this late in its development, with wet weather for example spreading fungal disease, with the inherent risk of toxic fungal residues.

Benson Quinn said it "would be more concerned with the potential effects of cool/damp conditions that go hand in hand with a relatively late harvest".

'No grain export limits'

The former Soviet Union continues to throw out bearish data, with Rusagrotrans estimating Russia's grain exports for August at 3.9m-4.0m tonnes, a record for any month.

And Ukraine formally quashed talk of limits on its milling wheat exports, speculation which sent prices soaring on Tuesday.

"We, according to preliminary estimates, have the opportunity to export 30m tonnes [of grains] or even more," said Yaroslav Cherevichny, the head of market monitoring at the country's agriculture ministry.

"With these export opportunities, common sense says that no grain export limits are necessary.""

Price performances

Close to the former Soviet Union, Paris milling wheat for November struggled, closing up a modest 0.2% at E171.50 a tonne, dented too by a slight strengthening in the euro, making eurozone exports less competitive.

London feed wheat for November edged 0.1% higher to £120.85 a tonne, facing improved UK harvest prospects.

However, Chicago wheat for September added 1.3% to $5.46 a bushel, ending just below its 40-day moving average.

Spring wheat, the type threatened by northern US and Canadian rains, added 0.9% to $6.15 a bushel in Minneapolis for September delivery.

Barley, sorghum trade fears

Wheat was a help for corn too, which added 0.4% to $3.69 a bushel in Chicago, despite mediocre US export sales data and continuing strong reports from the ProFarmer tour of the Midwest.

"The theme of above-average yield reports has continued," CHS Hedging said.

The increase also defied talk that US barley and sorghum are the latest feed grains to fall foul of Chinese authorities, with increased checks for pesticide residues and heavy metals.

"The US is the largest exporter of sorghum and China is the primary market. Could this have some potential side effects on the market? Will tons be returned?" CHS asked.

A refusal of US barley and sorghum cargos would only boost further the feed supplies in the US itself.

Cotton rally slows

Among soft commodities, New York cotton's rally calmed, with the December contract limiting its rebound this time to 0.2%, taking it to 65.92 cents a pound, the best finish in nearly a month nonetheless.

One negative is a claim by the Cotton Association of India that India will in 2014-15 overtake China as the world's top producer, with output of 6.74m tonnes, ideas that the US Department of Agriculture, which pegs the harvest at 6.0m tonnes, and International Cotton Advisory Committee, at 6.3m tonnes, have backed away from.

The Cotton Association of India's optimism reflects an improvement in the monsoon, after its poor start, allowing speedy progress in sowings.

"Planting is making rapid progress by mid-August 5.4% more acreage had been planted with cotton in India than at the same time last year," Commerzbank noted.

'Brazil offers to drop'

But raw sugar managed to extend its rebound from its six-month low of 15.38 cents a pound touched on Wednesday, jumping 1.9% to settle at 15.99 cents a pound for the October contract which closed above its 10-day moving average for the first time in nearly a month.

Jack Scoville at Price Futures noted "some talk around the market of the chance for shortages to develop soon as Brazil starts to wind down the cane harvest and Thailand gets its sugar sold.

"Brazil offers are expected to drop once the harvest there is complete."

Indonesia downgrade

And, in coffee, robusta beans this time outperformed, adding 1.0% to $1,988 a tonne in London for November delivery.

Coffee output in Indonesia, the world's fourth biggest coffee producer, mainly of robusta beans, will fall 14% to 600,000 tonnes this year, the Indonesian Coffee Exporters and Industry Association said, cutting its forecast by 100,000 tonnes.

"Unfavourable weather, and outbreaks of pests and diseases are causing the decline," said Irfan Anwar, the association's chairman.

Indonesia exports will fall 30,000 tonnes this year to 450,000 tonnes, he said.

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