PM markets: sugar price slump mars positive ag price picture
By Mike Verdin - Published 06/10/2017

Agricultural commodities outperformed to end the week.

OK, gains were not universal, with raw sugar for March, for instance, slumping by 2.9% to close at 13.98 cents a pound in New York, largely thanks to technical factors, after the contract failed earlier to break above a clutch of moving averages around the 14.40-14.50 cents a pound mark.

Indeed, many are talking of the market as rangebound, with Commonwealth Bank of Australia, for instance, earlier this week flagging that "sharp moves up and down keep on petering out to nothing as reversal follows reversal".

However, elsewhere in New York, cotton for December added 1.3% to 69.16 cents a pound in late deals, as the forecast route of Hurricane Nate took it back further east through Georgia, the second-ranked US cotton-producing state, and into much of south Carolina too.

'Rainfall still considered weak'

And arabica coffee futures for December settled up 2.2 % at 130.00 cents a pound, as worries revived over dryness in Brazil's key growing state of Minas Gerais.

The CNC producers' group said that while rains last weekend had eased worries over hot and dry weather, during a period when trees are undergoing the sensitive blossoming period, "the volume of rainfall" that plantations have received of late "is still considered weak".

"The trade is keeping a close eye on forecasts for the next few weeks, when fresh blossoming should occur."

'La Nina is coming'

At Price Futures, Jack Scotille said that "the weather in Brazil and the condition of the trees is getting attention as La Nina is coming and coffee areas are already dry".

However, forecasts are devoid of rainfall for many parts of central Brazil (and, indeed, La Ninas have a reputation for causing dryess in central Brazil).

MDA said that "showers should return to north western Mato Grosso, southern Mato Grosso do Sul, Parana, Santa Catarina, and Rio Grande do Sul today through Tuesday", with Minas Gerais not on the list, and dryness seen extending there for at least 10 days.

(Somar Meteorologica has said that rainfall may occur this weekend in the south of Minas Gerais.)

'Every forecast is scrutinised'

In grain markets, Brazil's dryness is garnering attention in particular in the soybean market, with sowings of the oilseed ongoing, but delayed by dryness concerns.

"The weather issue in South America still in play, as every forecast is scrutinised," said Benson Quinn Commodities.

CHS Hedging noted that oilseeds industry group Abiove "is projecting the Brazilian soybean crop at 108.5m tonnes, down from last month's estimate of 113.8m tonnes".

However, headway in Chicago futures was limited by the prospect of rains in key Brazilian growing areas, notably parts of Mato Grosso.

Furthermore, there were some nerves as to how markets in China, the top soybean importer, will react when they reopen on Monday after a holiday of more than a week.

Chicago soybean futures for November stood up 0.2% at $9.70 a bushel in late deals, although still just in credit for the week.

'Wet weather will delay harvest'

Corn futures underperformed on both scores, up just 0.1% at $3.49 a bushel for December delivery, and down for the week looking indeed at a contract closing low on a weekly chart.

Sure, there will be some US harvest disruptions from rains this weekend, with CHS Hedging, for instance, noting that "wet weather will delay harvest for much of the Corn Belt".

Benson Quinn Commodities said that "Midwest US weather still calling for a good soaking followed by better conditions later this weekend and into next week".

Furthermore, on the plus side for prices, the US Department of Agriculture unveiled the sale of 195,000 tonnes of US corn for export, to an "unknown" buyer.

However, it appears that speculators may have it in for the grain, to judge by the rise in open interest (ie the number of live contracts) at a time of price softness.

"Corn open interest has risen 136,835 contracts since August 30," Tregg Cronin at Halo Commodity Company said.

Spring wheat springs

Wheat fared better in Chicago, adding 0.5% to $4.42 a bushel, helped by further signs of revival in the Minneapolis spring wheat market, following its drubbing a week ago on higher-than-expected US production estimates.

The spring wheat market has taken a higher profile this year, thanks to shortages of higher protein wheat which have hardly been helped by US drought.

Halo's Tregg Cronin termed it "worth pointing out the improving technical and fundamental picture of Minneapolis spring wheat".

US export sales data for last week, revealed on Thursday, "notched the highest level in seven weeks and were the second largest of the marketing year," he said.

"Price has also found support from the 200-day moving average which we touched Monday through Thursday of this week and held.

"Further, various studies of momentum are indicating a potential bullish divergence," but would require moving back above $6.50 a bushel to confirm."

Minneapolis spring wheat futures for Deceber stood up 1.0% at $6.21 a bushel.

© Agrimoney 2017