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Weak US data ensure wheat ends poor month on sour note

Wheat futures posted their worst monthly performance since September 2011 as poor US export data added to the pressure on values from newly-started harvests, and diminished weather threats.

Chicago soft red winter wheat, the world benchmark, for July delivery ended 0.8% lower at $6.27 a bushel.

Besides bringing the grain its lowest close in three months, and its 16th negative close in 17 sessions, the performance meant the grain fell 12.0% on a spot contract basis, the biggest fall in a calendar month since September 2011.

Behind forecasts

The decline was accelerated by data on Thursday showing American export sales wheat last week for delivery during 2013-14, which ends tomorrow on the US calendar, were exceeded by cancellations by a margin of 52,000 tonnes.

The cancellation of a 52,000-tonne Taiwanese purchase, and of smaller orders by the likes of Israel, Mexico and Brazil, more than offset fresh sales to South Africa and Yemen.

While net cancellations are not unknown late in the marketing year, the latest data left US shipments - at 31.74m tonnes in aggregate orders and shipments for 2013-14 - well behind those forecast for the full season.

The volume actually shipped has reached 29.47m tonnes.

The US Department of Agriculture has forecast exports for the whole season of 32.25m tonnes.

"With the wheat crop year ending tomorrow I think it's fair to say, we definitely will not make the USDA wheat export projections," CHS Hedging said.

'Still overpriced'

Although last week's US wheat export sales for 2014-15 were strong, at 532,000 tonnes, the overall picture was viewed as "negative" by Richard Feltes at RJ O'Brien, and of underlining concerns that American supplies are uncompetitive on world markets.

"US wheat is still overpriced, and over all prices globally are in a tailspin," said Sterling Smith at Citigroup.

Earlier, Australian wheat for January ended down 2.2% at Aus$306.00 a tonne, amid waning dryness concerns for autumn sowings in most areas bar a pocket in northern New South Wales and southern Queensland.

'Desperately wanted the business'

In Paris, soft milling wheat for November actually closed unchanged at E191.50 a tonne for November delivery, although this meant matching a four-month low.

Paris wheat ended the month down 11.0% on a front contract basis.

In fact, European export data for this week came in strong, at 560,000 tonnes, a large figure for late in the season, when supplies are running low.

However, details of an Algerian order of 700,000 tonnes of new crop French wheat this week underlined the growing competitiveness of the international market.

"Algeria bought at about a $10 discount to the current French market price," traders at a major European commodities house said.

"Clearly, French traders desperately wanted the business and were met with stiff opposition from other sources."

'Prolonging the concern'

Harvest pressure is also adding to the downtrend, as combines begin to roll in the likes of China and the US, adding to available supplies.

The one worry for investors is dry weather in parts of the former Soviet Union, although regional farm operators Trigon Agri and Kernel Holding denied any crop damage on their operations.

Still, World Weather said it believed production losses had "already occurred in Kazakhstan, and the middle and lower Volga River Basin may soon experience the same if significant rain does not fall soon".

Weather models show that a "high pressure ridge develops over the Volga River Basin and Ural Mountain region for a while late this weekend into most of next week, causing temperatures to trend hotter and prolonging the concern over crop conditions".

'Above-average start'

Price weakness was felt in other grains too, including corn which ended in Chicago down 0.8% at $4.65 a bushel. That meat a drop of 9.4% during May, on a spot contract basis.

US export sales were in line with expectations, at 621,000 tonnes of old crop plus 91,000 tonnes for 2014-15.

However, US weather remains benign, a factor which is expected to show up in USDA data on Monday showing the first crop condition rating of the year for corn.

"The rating could be at or above 70% 'good' or 'excellent', indicating an above-average start to the 2014 US growing season," RJ O'Brien's Richard Feltes said.

New crop corn for December ended down 1.4% at $4.56 a bushel.

Strong export sales

Soybeans closed lower too, although by a relatively small 0.4% to end at $14.93 a bushel, down 2.4% for May.

Old crop US exports for the oilseed were actually decent, at 60,300 tonnes, when any positive number extends the balance sheet squeeze.

The US has already, at 44.9m tonnes, sold more than the 43.55m tonnes the USDA forecast for the whole of 2013-14, which ends in August for the oilseed.

A little over 42.7m tonnes have actually been shipped.

For new crop, export sales reached 821,100 tonnes, exceeding forecasts.

Supply hopes

Still, while concerns remain about the thinness of US stocks in the latter stages of 2013-14, the decent US weather is underpinning expectations for a record crop this year.

Brazil's harvest too looks set for an all-time high, with Agroconsult estimating output in 2014-15 (albeit far from even being planted) at 94m tonnes, above the USDA forecast of 91m tonnes.

And as an extra downer, China said it was planning to auction 428,000 tonnes of soybeans from state reserves at its next auction, up from the typical 300,000 tonnes or so, and questioning ideas that the country was winding down its programme.

November soybeans ended down 0.8% at $12.33 a bushel, but down 1.0% for May.

Hot chocolate

Among soft commodities, cocoa for July ended up 0.8% at $3,071 a tonne in New York, the best finish for a spot contract since August 2011, despite the International Cocoa Organization late in the day cutting its estimate for the world production shortfall in 2013-14.

The impact on stocks was muted by an increase to the deficit estimate for last season.

The ICCO has also privately said that it expects a production shortfall in 2014-15 too.

Today's data came too late to have much influence on London futures, which ended up 0.9% at £1,950 a tonne for July delivery, the highest close for a spot contract since July 2011.

Higher Brazil hopes

But arabica coffee for July tumbled 2.5% to 177.50 cents a pound for July delivery, down 12.8% for the month as bears were given heart by some more upbeat estimates on Brazil's drought hit crop.

Interagricola, an affiliate of soft commodities giant Ecom, said that Brazil would likely produce more than 51m bags of coffee this year, supporting exports of 33m bags.

And coffee trader Mercon Group estimated the harvest at 50.5m bags, down 4.6m bags from a forecast made in December, as drought was beginning in Brazil's coffee belt, but around the top end of market estimates.

London robusta coffee for July dropped a more modest 0.6% to $1,937 a tonne, amid some concern over dryness in Vietnam, the top producer of the bean.

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