PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:34 GMT, Monday, 19th May 2014, by Agrimoney.com
Wheat ends losing run, amid signs of fresh weather concern

Cocoa, soybean and, belatedly, wheat futures managed to attract some buying.

But that was not the case for most agricultural commodities, and most notably corn, which suffered from ideas of decent progress on US sowings, encouraging investors to remove risk premium.

Data later on Monday are expected to show US corn plantings some 70-75% complete, around about average levels.

And more strong sowings are expected this week, with the northern US wetness which has slowed plantings giving way to drier and warmer conditions.

'Substantial progress is expected'

"Weather forecasts are favourable into early June," Benson Quinn Commodities said.

"Temperatures are finally warming in the north to near normal to above by early June."

At Country Futures, Darrell Holaday said: "Corn planting progress data out today is expected to reach as high as 72%.

"But substantial progress is expected this week that will push it up to 90-95% by week's end."

Nor did weekly US export data help that much in coming in at 1.06m tonnes - not a bad figure, but well below the 1.21m tonnes a week before.

Corn for July dropped 1.3% to close at $4.77 a bushel in Chicago, if bouncing off its 100-day moving average 1 cent below, which it touched for the first time in three months.

The new crop December contract indeed closed below its 100-day moving average for the first time since late July, in ending down 1.1% at $4.75 a bushel.

'Much-needed precipitation'

Also among the losers was cotton, which for July ended down 0.7% at 89.15 cents a pound in New York, a two-month closing low, undermined by its own improved sowing expectations, given the rains forecast for the US south, where it has been plagued by the drought also hurting winter wheat.

"Cotton planting is progressing in the southern Plains despite dryness," broker Doane said.

"Forecasts do call for chances for much-needed precipitation late this week."

The fibre is also being undermined by ideas of lower imports by China, which is reforming the subsidy regime which fostered huge buy-ins and stockpiling, while technical factors are deteriorating too, with the July contract moving easily through a series of support levels.

On Monday, it managed at least to hold just above its 100-day moving average, which it has not closed below in 2014.

Demand questions

Also in New York, raw sugar fell too, by 0.8% to 17.77 cents a pound for July delivery, erasing early gains, with technical factors playing a role too, in appearing to mitigate against further rises and keep the sweetener within a trading range.

"Sugar is retreating as the chart resistance seen at the 18.30 cents-a-pound and 18.00 cents-a-pound levels is becoming more apparent," said Sterling Smith at Citigroup.

Furthermore, last week's jump higher, as hedge funds defeated trade investors, "stymied physical demand as there is a large current surplus," Mr Smith said.

Nick Penney, senior trader at Sucden Financial said that "we are waiting for more end user demand to show up or further political/economic developments out of Brazil to justify any further movement upwards".

Still, end sugar users "may have been softened up by the recent rally and support may arrive earlier than previous levels," Mr Penney said, forecasting that values will remain in a range of 17.30-18.30 cents a pound.

Losing streak halted

But, back in the grain markets, wheat managed a surprise recovery to manage its first positive close in nine sessions in Chicago, if adding only 0.25 cents to $6.74 a bushel for July delivery.

The revival was in part technical with the grain seen has rating oversold following its sell-off, and with $6.63   a bushel - which the July contract fell below earlier, but failed to hold underneath seen as a key technical level, in spurring rebounds twice last month.

Still, there was some other more negative weather talk too to offset the more positive US conditions, which are evident not only in terms of a drier north, boosting spring wheat sowings, but rains in the south to refresh drought-hit winter wheat seedlings.

Too little, too late?

Sure, "generally, the weather outlook continues to be somewhat bearish", Country Futures' Darrell Holaday.

But MDA said that while showers "are expected to finally return to the south western Plains later this week", precipitation amounts "are expected to be too light to significantly reduce long-term drought".

They will also come "too late to improve yields for winter wheat in most areas".

And there is a bigger worry beginning to blip on the radar, and that is from the former Soviet Union, where a dearth of rain in some parts of Russia is also beginning to attract attention.

'Water deficit present'

To be sure, the risk is still low, and consultancy Ikar highlighted that Russian wheat prices fell $5 a tonne last week, as new crop approaches and exports from Ukraine continue to be unaffected by the country's crisis.

But Russian drought scares have a rich history of sending wheat prices soaring.

And MDA cautioned that "dryness will build further across northern and eastern Central Region, Volga Valley and north eastern North Caucasus, which will increase stress on spring wheat, corn and sunflower early growth, as well as winter wheat growth".

Agritel flagged that a "water deficit is still present in south Russia".

And in Chicago, Richard Feltes at RJ O'Brien highlighted "developing dryness across one-third of former Soviet Union crop areas".

Kansas City hard red winter wheat for July closed up 0.3% at $7.70 a bushel.

But the revivals came too late to help Paris wheat, which had already ended down 1.0% at E197.25 a tonne.

Traders wrestle

Soybeans proved the best performer of Chicago's big three, helped by decent US export data of 167,953 tonnes last week.

While not huge compared with levels earlier in the season, and down from 240,543 tonnes the previous week, the figure revived concerns for supplies in the US, which has sold more exports than it was expected too, and is indeed forecast to see several cancellations or deferments.

"The soybean market continues to struggle with the question of how old-crop US usage will fit within the envelope of supplies," said Anne Frick at Jefferies Bache.

CHS Hedging said: "Soybean traders continue to wrestle with the question of whether or not imports will be adequate to connect the old and new crop years in the US."

'Support held'

In fact, the "somewhat bullish" export figure "seemed to prompt a rally that pushed into buy stops", Country Futures' Darrell Holaday said, adding that technical factors played a role too.

"The $14.60-a-bushel support held and that prompted buying," he said.

The July contract ended up 1.4% at $14.85 a bushel.

New crop November soybeans gained 1.4% to $12.38 a bushel, also gained support from a strong pace of corn plantings, which reduces the risk of growers switching to the oilseed, which can be later seeded.

Back in New York, cocoa for July added 0.4% to $2,930 a tonne, while London's July contract added 0.8% to 1,839 a tonne on gains attributed to technical factors, after contracts for a second session failed to hold for long below 100-day moving averages.

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