Commodities rounded off a negative month with a negative
close, soybeans included, after a
cancellation by China of an order of the oilseed from the US touched a raw
Any hope of soybean futures building on early resilience was
quashed when the US Department of Agriculture announced that Chinese buyers had
ditched a 200,000-tonne order for US soybeans for 2014-15 delivery.
The announcement quashed the optimism that had emerged on
Thursday with some better weekly US export sales data, showing 416,700 tonnes
for soybeans for 2014-15, including 300,000 tonnes sold to China, and 899,100
tonnes forward sales for next season.
"Soybean sales came in very strong this week," Joe Lardy at
CHS Hedging said 24 hours ago, noting that old crop sales "were the biggest in
14 weeks, since April 23", taking total commitments for the season 3% above the
level the USDA has forecast.
"New crop sales were the second largest of the marketing
year," he added.
'Made no sense'
However, after the cancellation, sentiment was more muted.
In fact, Darrell Holaday at Country Futures said that the
cancellation was merely "fixing the error in the export sales report yesterday.
"It made no sense that China would have bought soybeans for
August delivery from the US," he said.
"Their interest is new crop and that is limited."
South America vs US
Comments from Soren Schroder, the chief executive of Bunge,
underlined that China has "built inventories" of soybeans thanks to heavy
purchases from South America.
"We had a very, very strong flow of soybeans from South
America, from Brazil in particular, during April, May and June," he told
Thanks to the Chinese stocks, the "early part of the US
export season will be a little slower than it was last year", he added, hardly
a positive for futures.
"Soybeans might find it difficult to find support as Chinese
cancellations more than likely cap prices for the day," Benson Quinn
And indeed so it proved, with soybean futures for August falling
1.1% to $9.80 ¾ a bushel, while the better-traded November lot fell by 1.1% to $9.40
¼ a bushel.
An improvement in the US weather outlook was little help
either, nor indeed to corn.
"Weather leans negative" for prices, Richard Feltes at RJ O'Brien
said noting that next week was "looking cooler and wetter for the Midwest", a
positive for row crops.
OK, a "dry pocket in north east Iowa, south west Wisconsin and
north east Illinois is unlikely to see weekend relief", he added.
But corn futures ended lower too, although less so, falling
by 0.4% to $3.71 a bushel for the September contract, and by 0.5% to $3.81 ¼ a
bushel for the best-traded December lot.
'Spooked some customers'
Corn gained some plaudits for a 108,000-tonne sale of US
supplies to Mexico, split between old and new crop.
Still, on the negative side, the Buenos Aires grains exchange
pegged Argentina's corn crop at 26m tonnes, 1m tonnes above the USDA forecast,
given better-than-expected results from the harvest, which is 79% complete.
Furthermore, the International Grains Council issued a
caution on potential changes to Chinese corn subsidy policy, which could have a
huge impact on corn and other markets.
And overall sentiment on US exports on corn remains downbeat
"We will likely look back and see that the rally in corn -$1
a bushel in late June and into mid-July - was ill timed from a US export angle,"
Mr Holaday said.
"It spooked some traditional US customers to South America
as they had their corn harvested and were offering much cheaper values.
"Now that price has retreated they have their orders filled
through much of the fourth quarter out of Brazil and Argentina."
Wheat finds firmness
Wheat did better
on the day, adding 0.4% to $4.99 ¼ a bushel for September delivery, helped too
by its own US export success.
The USDA unveiled the sale to "unknown" of 126,900 tonnes of
US wheat, spread between hard red winter, white and hard red spring varieties.
Still, it has to be noted that the contract is down 19% for
the month, much worse than the 11.8% drop experienced by the average commodity,
as measured by the CRB index.
Chicago wheat has been weighed by factors including the
retreat somewhat of drought concerns in Canada, as highlighted by Saskatchewan
data overnight, and Australia, besides by the lack of competitiveness of US
supplies with those from other exporters such as Russia.
'Hot and dry conditions'
Among soft commodities, cotton
gained too, getting over a weak start which dragged the December contract to a
three-month low of 63.27 cents a pound, to close 64.21 cents a pound, a gain of
1.0% on the day (although down 5.4% for the month).
The Delta, one place where
the US weather outlook is less than idea, is a major cotton-growing area.
"Weather forecasters continue to predict hot and dry conditions
for cotton crops in the US Delta," said Tobin Gorey at Commonwealth Bank of
In Texas, the top cotton-growing state, "crops too are now
sitting in drier soils to with, forecasters predict, not a lot of rain on the
However, raw sugar
for October fell by 1.2% to 11.14 cents a pound, undermined by 1.6% drop in the
real against the dollar.
Weakness in the Brazilian currency undermines prices, in
dollar terms, of assets in which Brazil is a big player.
And Societe Generale added a negative note for sugar, and coffee too, lowering forecasts for the
real and flagging the negative pull on both ags from this month's broader
'Unable to escape
"Global oversupply in crude
oil and copper, and a rising
dollar reducing demand for gold as an inflation hedge, has sent commodities
plummeting in recent weeks," SocGen said.
"Both sugar and coffee have not been able to escape this
dynamic as the trend for much of the year, and certainly in recent days, has
been to move less independently against the commodity space.
"While there are supply and demand fundamental reasons for
the downtrend in sugar and coffee prices, this pressure is exacerbated by the
weakness in both the real and the general commodities space."
Still, New York arabica coffee managed a 0.3% increase to
125.25 cents a pound, for September delivery, nonetheless, helped by concerns
over Brazil's harvest raised by the CNC producers' group.
The contract was down a bit over 5% for the month.