PM markets: wheat futures dodge bullet, but other ags drop
By - Published 19/06/2015

Friday was a tricky day for ags.

And there wasn't even a strong dollar to blame it on, with the greenback little changed on the day despite the ongoing concerns over a Greek exit from the eurozone, which might have been expected to provoke a "risk off" trade.

There was one crop threat that seemed to work in supporting ag prices, and that was of further dryness in the Canadian Prairies, after the caution from Saskatchewan officials on Thursday of the damage already being done by a dearth of rain.

"Rains should improve moisture in west central [Prairies] areas, but more will be needed," said MDA.

And some forecasters reckoned that many needy areas would be largely missed.

Rare gainers

Canola, of which Canada is the top exporter, rose by 1.7% to Can$502.70 a tonne in Winnipeg for the best-traded November contract, the lot's best finish in 18 months.

The July lot added 1.8% to Can$503.70 a tonne, the best close for a spot contract in 13 months.

Meanwhile, spring wheat, of which the Prairies is also a huge grower, ended in Minneapolis up 0.6% at $5.43 a bushel for July.

It was also given help by its hard red winter wheat partner, as traded in Kansas City, which ended up 1.1% at $5.03 ˝ a bushel for July delivery, helped by the slow progress of the harvest in the southern Plains, where it is grown.

'Relentless heavy rains, stripe rust'

A US Wheat Associates reported underlined the poor progress, saying in a weekly report that, unusually, it had not tested any additional wheat samples this week "due to the lack of additional harvesting".

What information the group, which promotes US wheat exports, was getting backed ideas from last week of poor test weights, "attributed not just to the relentless heavy rains, but also to stripe rust during the final stages of development".

And Chicago-traded soft red winter wheat futures managed a gain of all of 0.5 cents to $4.88 ˝ a bushel for July, boosted by its hard wheat peers,  

US Wheat Associates said that "rains have continued to delay harvesting in the Midwest," where soft red winter wheat is grown, but from what could be gleaned from initial results, the grain coming off is not actually in such dismal condition.

Too much, too little

Still, elsewhere, gains were hard to come by, even amid soybeans, which ended down 0.7% at $9.71 a bushel for July delivery, despite ideas of setbacks to the US crop from this week's heavy rains.

This is expected to see the US Department of Agriculture on Monday, in its weekly crop progress report, cut its estimate for crop condition.

At RJ O'Brien Richard Feltes said that the "trade is looking for 2-3 point decline in the US soybean rating", in terms of the proportion rated good or excellent.

"Some analysts expect a larger cut given that one-third of the US soy area is labouring under either excess moisture, in the Midwest, or is too dry, in the South East."

Acreage downgrade

Furthermore, there are doubts whether US farmers will complete soybean plantings, thanks to the extent of moisture.

Informa Economics on Friday joined commentators cutting its sowings forecast by 425,000 acres.

That said, at 86.76m acres, the estimate is still well above the USDA estimate at 84.6m acres.

"You can spend time talking about conditions all you want, but an acreage number above 86m acres will be bearish with even decent yields," said Darrell Holaday at Country Futures, reckoning that the market has been trading a sowings number below that of the USDA.

Better weather

Besides, the rainy weather that has been dogging crops is due to blow through.

CHS Hedging noted that the "6-10 day forecast calls for below-normal precipitation and above-normal temperatures for the areas that are behind on soybean plantings".

Allendale said that "the balance of the weekend across the lower portions of the Corn Belt will have to deal with the remnants of Tropical Storm Bill", but afterwards will see "open weather".

That was a negative to corn too, which ended down 1.3% at $3.53 Ľ a bushel for July delivery.

'Almost universally bearish'

New York saw losses too, with talk of investors selling out before first notice day for July contracts, bringing physical manifestations to owning futures.

Arabica coffee for September dropped 1.4% to 130.10 cents a pound, as bulls sold out with the deadline approaching and without any apparent hope of a short-term price bounce.

"Analysts remain almost universally bearish on ideas of bit production potential this year in Brazil and Vietnam due to the rains that have returned to both countries," said Jack Scoville at Price Futures, with Brazil and Vietnam being the top producer of arabica and robusta beans respectively.

Furthermore, US officials forecast record production and exports in 2015-16 from Honduras, the world's sixth-ranked coffee shipper.

London robusta coffee for September eased  0.4% to $1,773 a tonne.

'Running out of time'

Back in New York, raw sugar for July fell 1.2% to settle at 11.12 cents a pound – the weakest close for a spot contract since December 2008.

Again, the prospect of the contract's expiry was noted.

Sucden Financial flagged "continued selling by producers running out of time on price fixations against July", besides the "weight of selling by both Thai and Brazil producers against October futures".

Noting the prospect early next week of Unica's twice-monthly updata on the Centre South cane crush, Sucden said that "it is expected to be a bearish report and we are seeing a pre-emptive move ahead of it".

Commerzbank said that "the continuing oversupply on the global sugar market is to blame for the slump in the price of sugar," flagging a forecast from the Indian Sugar Mills Association of an Indian production surplus of up to 2m tonnes in 2015-16.

'Longer term bearish'

Cotton dropped too, by 1.3% to 63.90 cents a pound for December, with more general downbeat feel cited.

"Most in the trade remain longer term bearish as it looks like the US can have a good crop despite less planted area this year and as world stocks remain generally very large," Mr Scoville said.

Commonwealth Bank of Australia's Tobin Gorey noted improved US weather, saying that "weather forecasters expect drier conditions on most Texas cotton regions after recent rain deluges. 

"Weather forecasters expect dryish Mississippi Delta cotton crops to get the rainfall they need over the next week or so – otherwise significant crop stress is likely." 

Better-than-expected monsoon rains in India are helping out too, in boosting production prospects.

'In the DNA'

And New York cocoa closed down 0.9% at $3,260 a tonne for September, after earlier hitting a nine-month high for a nearest-but-one contract of $3,299 a tonne.

Hershey little helped by issuing a profits warning, blaming weaker-than-expected chocolate sales in China, while Brazil's farm minister, Kátia Abreu, said that the South American country could return to being a major exporter of the bean.

"We have two national products that are in the DNA, the heart of Brazil. One is cocoa and the other coffee," she said.

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