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|Evening markets: wheat, coffee lead rebound in crop prices
By Agrimoney.com - Published 21/09/2012
Wheat, which has for most of the last month managed to avoid the quagmires dragging fellow crops corn and soybeans lower, went one better on Friday.
Freed, unlike its peers, of harvest pressure, which in bringing in supplies offers a temporary reprieve to buyers, wheat made the most of some supportive news to show them a clean pair of heels.
'Positive for the market'
One snippet was talk of the early harvest in Argentina not going so well, despite supportive comments from the farm ministry overnight saying that the country's crop was "in good shape generally" despite flooding in Buenos Aires province a couple of weeks ago.
"Early harvest of wheat in Argentina is revealing wheat yields below expectations," Darrell Holaday at Country Futures said.
Furthermore, rains remained elusive for Western Australia, where the window is closing for moisture to make a real difference to a dryness-tested crop.
However, the main factor putting lead in wheat's pencil was the announcement by Russian economy minister Andrei Belousov that the country might, after all, impose restrictions on grain exports, curbs that it has signally avoided so far this season despite a drought-hit harvest.
"This is contrary to other official reports and was a positive for the market," broker US Commodities said, noting that "it is true that Russia has now exported the US Department of Agriculture forecast in the first three months of the year".
'Rapidly becoming an irrelevance'
OK, not all observers were quite so impressed with the implications of the comments.
Traders at a major European commodities house, with significant Black Sea interests, said that futures prices were rising "on what is rapidly becoming an irrelevance.
"Russia's exportable surplus is disappearing fast and prices have already risen to European levels, so price will likely limit exports anyway."
Recent Egypt and Iraq tender data has shown Russian supplies relying on shipping advantages to win exports to Egypt in preference to French grain, while losing most of their discount to other origins too.
"Russian wheat prices will gradually rise to put them out of world market, a preferable alternative to an outright export ban," Richard Feltes at broker RJ O''Brien said.
Whatever, the result was a strong day for wheat futures, which soared 2.2% in Chicago for December delivery to close at \$8.97 ¼ a bushel.
In Paris, wheat for November added 1.0% to E263.75 a tonne, while London wheat gained 0.5% to £206.50 a tonne, lagging despite data from the HGCA crop bureau confirming the poor quality of the UK, with a specific weight of 70.7 kilogrammes per hectolitre "the lowest on records going back to 1977".
But then Agrimoney.com clocked that one last month.
Specific weight measures weight per given volume, and gives an indication of levels of shrivelled grain, unsuitable for milling.
The protein content at least is decent, at 12.5%, "an increase on 2011 and the highest since 2006", the HGCA said.
With wheat so firm, it made it more difficult for the row crops to drop in Chicago, especially on a reasonable day in outside markets, which saw shares edge higher and the safe haven of the dollar ease.
However, they struggled for gains against harvest pressure which is only mounting for now, with decent weather speeding combines.
"Harvest activity has been heavy this week, with a dry weekend ahead expected to advance corn harvest to 45% complete and beans to 25% complete by Monday," when the USDA unveils weekly crop progress data, Benson Quinn Commodities said.
Yields are continuing to come in less dismal than expected too.
"Soybean yield reports from the northern plains have been surprisingly exceptional for beans," Benson Quinn said, noting that Minnesota, which has also seen a notable revival in its farmland market, and South Dakota "have been reporting better soybean yields as well".
"Corn yields across most of the Midwest continue to disappoint, but the trade is looking for better yields when corn harvest starts in the northern states later next week."
RJ O'Brien's Mr Feltes said that is was "significant to note that row crop markets are trading below key moving averages despite stellar demand news on soybeans, which appears secondary to fears that 2012 US soy crop may be markedly understated".
US exports of soybeans have held up, and the USDA on Friday unveiled the sale of 140,000 tonnes of soymeal to South Korea.
"Items like this makes one realise that even a one bushel-per-acre increase in the soybean yield is not bearish to the soybean complex."
Mr Feltes added: "Once the 2012 US soybean crop size us clarified next month, I suspect we'll still be dealing with ongoing steady pace of Chinese soy buying which shows no sign of abating as yet," although the latest rumours of purchases of US supplies in the last week have gone so far unconfirmed.
Still, any bullish sentiment received a late knockback when Informa Economics raised its forecast for US sowings of corn and soybeans for the 2012 crop, and came in with some humungous estimates for plantings in 2013.
Corn area will reach the highest since 1936, and soybean plantings a record, the consultancy said, largely at the expense of cotton, for which seedings will pull back to 10m acres.
Corn for December added 0.4% to \$7.48 ¼ a bushel, while November soybeans gained 0.3% to 16.21 ¾ a bushel.
Signally, funds were seen as buyers, of 5,000 corn lots and 3,000 soybean contracts – to bring their estimated net flows this week to -25,000 lots and -36,000 lots respectively.
'Beginning purchasing campaigns'
Among soft commodities, it was broadly a positive day too, bar in cotton, which tumbled 2.6% to 73.25 cents a pound.
New York raw sugar for October extended its rebound, adding 0.9% to 19.38 cents a pound, boosted by ideas of rains slowing the cane harvest in Brazil (while welcomed by soybean farmers starting plantings).
And arabica coffee for December added 2.8% to 173.30 cents a pound, despite feeling a negative force from Brazil's rains
"The expectation of considerable rainfall over the next few days in Brazil… could herald the start of the rainy season," Commerzbank said, noting that this in turn "would create favourable conditions for the blossom phase of the coffee trees in September and October".
However, Silas Brasileiro, the executive president of Brazil's Conselho Nacional do Café, flagged the temptation for roasters to purchase on the dip in prices seen in the last session, saying that the industry was entering "the post-summer in the northern hemisphere and industries are beginning their purchasing campaigns".
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