Wheat soars, helping corn higher. But coffee, cotton drop
By - Published 06/05/2015

Wheat found some buyers at last.

It took quite a confluence of bullish factors - including a European stocks forecast downgrade, data on Canadian stocks and downbeat results from the Wheat Quality Council crop tour of Kansas (described more fully elsewhere on - to drag wheat futures out of their decline.

But, with a weaker dollar chipping in too - down 1.1% against a basket of currencies - Chicago wheat for July closed up 2.7% at $4.79 a bushel, ending back above its 10-day moving average for only the second time in the past month.

Kansas City hard red winter wheat for July ended 2.9% higher at $5.04 a bushel, closing above its 10-day moving average for the first time in a month.

That said, whether the gains stick into the next session is a different matter, with rains in the US Plains easing dryness concerns for that crop.

'Difficult to sustain buying interest'

"The rainfall in the Plains is making it difficult to sustain significant buying interest," said Darrell Holaday at Country Futures.

Benson Quinn Commodities said that "weather for US and global crops is generally viewed as favourable," although it did flag that some of the northern Plains might "miss out on potential rains slated through the end of this week".

In the European Union, the top wheat producer and exporter, rains "have eased dryness across the UK and much of France, improving conditions for wheat growth and germination of summer crops", said Kyle Tapley at weather service MDA.

However, there is some small weather hook for bulls, with dryness remaining "a concern in Slovakia, Hungary and northern portions of former Yugoslavia", Mr Tapley said, noting increasing moisture shortages in Poland too.

"No significant improvement is expected across the drier areas of Hungary and Slovakia" in terms of rainfall, stretching out into the middle of the month.

Ethanol output slide

The wheat price gains - which were viewed as largely spurred by covering by hedge funds of some of their huge net short position, rather than fresh buying carried over a little into rival grain corn too, which gained 1.0% to $3.66 a bushel.

From a technical perspective too, "corn gained a fair amount of support from the fact that it bounced off a new low" in the last session, said Brian Henry at Benson Quinn Commodities.

Ethanol data was more of a mixed bag, showing a 3.7% drop to 887,000 barrels a day in US production last week the lowest figure since October, and the biggest decline since September.

That implies less corn being used by bioethanol plants, for which the grain is their primary raw material.

'Stronger basis levels'

However, at least ethanol futures rose, by 1.5% to $1.652 a gallon in Chicago for June delivery, the contract's best close in six months, supporting margins for producing the biofuel.

And corn is getting some support from the firm US cash market too.

"The recent drop in the futures price of corn has pushed farmer marketing of corn to almost nothing in many locations," broker CHS Hedging said.

"Cash basis levels were noticeably stronger yesterday, as end users paid up buy hedges inventories to keep corn in the pipeline."

'Fund buying dried up'

Where Chicago bulls noticeably lost out was in the soy complex, where the strength imparted to the vegetable oils market by an Indonesian palm export tax, and apparent Chinese buying, faded.

"The fund buying in the soyoil market seems to have dried up after heavy buying on Monday and Tuesday," Darrell Holaday at Country Futures noted.

Soyoil for July ended down 0.5% at 32.92 cents a pound, having earlier set a two-month high of 32.48 cents a pound.

And soybeans eased too, ending down 0.2% at $9.82 a bushel for July delivery.

Export data

It was little help that a Bloomberg survey reported expectations the US Department of Agriculture, in crop estimates for 2015-16 released on Tuesday, will peg soybean supplies at the end of 2015-16 at 446m bushels - 16m bushels higher than its initial forecast.

Furthermore, Mr Holaday flagged US Census Bureau data from Tuesday which showed US soybean exports at 91.2m bushels, 3m bushels shy of data drawn from weekly cargo inspection data.

Country Futures calculations imply that "it is fair to say that it will be very difficult to reach" the 1.79bn bushels of soybeans that the USDA believes the US will export in 2014-15.

It was also a negative for oilseeds that Winnipeg canola futures dropped, by 0.7% to Can$455.40 a tonne for July delivery, despite Statistics Canada reporting Canadian stocks of the rapeseed variant at 7.04m tonnes as of the end of March.

That was well below the 7.4m tonnes that investors had expected, besides the year-before figure of 8.68m tonnes.

'Full blown break-out'

Among soft commodities, the weaker dollar, and stronger Brazilian real, helped raw sugar for July add 0.9% to 12.87 cents a pound for July delivery.

Besides growing hopes that last week's record sugar delivery, against the expiring May futures contract, will find a home, some investors are pointing to the strength in futures in China, a major sugar-importing country.

The Zhengzhou's September white sugar contract closed earlier at 5,622 yuan a tonne, down on the day but still up 19% so far in 2015.

Some chart technicians are suggesting that the Zhengzhou contract "is in full blown break-out with a confirmed head and shoulders bottom indicator in the price action", Sucden Financial noted.

'Planting progress will expand greatly'

However, other softs fared less well, including New York coffee, which tumbled on improved Colombian production and export data, as discussed elsewhere on, while cotton for July dropped 1.3% to 65.86 cents a pound, undermined by forecasts of benign weather in major US growing regions.

"Ideas are that planting progress will expand greatly this week," said Jack Scoville at Price Futures.

"The US weather situation is better as beneficial rains are forecast for the Texas Panhandle and as drier weather is expected in the Delta and South East."

© Agrimoney 2017