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Evening markets: corn, cotton star as crops avoid sell-off

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Remember the sell-off last week, as investors spilled out of commodities, amid concerns for Greek debt, post Gadaffi Liyba, Chinese interest rates, you name it?

Many of the concerns made it over into a fresh week, sparing a softening in share prices and a drop in many raw materials too.

New York

crude

stood 2.6% lower at $97.04 a barrel in late deals, amongst its lowest levels of the last two months. The CRB commodities index dropped 0.5%, despite a weakening

dollar

, which made its main, dollar-denominated components more competitive as exports.

However, grains were spared a drenching by rains, forecast for areas of the US where they are most definitely not needed, and contrary to the drier-looking outlooks presented last week.

"While external markets remain choppy and sentiment nervous, ongoing weather concerns pose a significant supply risk to the grains markets, especially for

corn

where US inventories remain very low," Sudakshina Unnikrishnan at Barclays Capital said.

Yield threat

OK, US farmers will have got a fair bit of crop in over the last week, with traders estimating US Department of Agriculture data will show the corn crop 60-65% seeded, a big improvement on last week's 40%.

But it is still behind the normal 75% by now and means that at least one-third of the crop will have been planted beyond the optimal window.

"You can lose up to 1 bushel day [planting corn] after May 15," US Commodities said.

And the "problem going forward is going to be the limited gains experienced in the eastern Corn Belt as a cool/wet pattern is expected to persist in this region", Benson Quinn Commodities said.

Area losses?

Furthermore, it is cold, with freezing temperatures registered over some growing areas over the weekend.

"The soils are also cool, so the earlier planted crops are not advancing as fast as they should," US Commodities said.

The setbacks added up to the "real possibility that overall planted acres could be down 2m-3m acres and corn could be down 1m acres", not helpful when the US is attempting to rebuild low stocks.

And, for prices, that mean, according to Darrell Holaday at Country Futures, that "the corn market built off of some panic buying tied to weather conditions that continue to point to lower US corn acres".

July corn, now Chicago's spot contract, spent much of the day above $7 a bushel before surrendering it in late deals to end up 2.3% at $6.97 ½ a bushel. Rumours of Chinese corn purchases on last week's break were also very much alive.

New crop December corn gained 1.4% to $6.35 ½ a bushel.

The corn planting scenarios were poor news for prices of

soybeans

which, being later sown, are viewed likely to pick up acres if farmers give up on the grain. Chicago's July lot eased 0.25 to $13.26 ½ a bushel.

More dryness

However, they helped

wheat

keep its chin up, with delays from wet to US spring plantings a prop too.

"Some spring wheat areas have done little to nothing at this point," Benson Quinn said.

"This week should allow for some progress to be made early in the week, but another rain event is expected late in the week."

And weather for winter wheat crops it hardly ideal, dry in the US, China and Europe, in looking that way for parts of the former Soviet Union too.

WxRisk.com forecast that "all of western and central Europe stays dry through next seven days", although France and Germany may get some rain thereafter.

In Ukraine and/ western Russia, "models are very dry, with 25-50% of normal rainfall over the next 10 days", with China looking "very dry" too over the next week.

Wheat rose 1.2% to $7.36 ½ a bushel in Chicago for July delivery, with the Kansas hard red winter wheat contract up 0.8% at $8.76 a bushel.

European contracts gained too, with Paris's November lot up 1.3% at E228.75 a tonne, despite a revived euro, and London's equivalent adding 1.4% to £177.75 a tonne.

Queues for sweetness

Still,

cotton

was an even better performer, lifted the daily maximum of 6.0 cents, or 4.1%, to 151.15 cents a pound in New York for July delivery, amid talk of a shortfall in deliverable stocks against the contract besides the weather setbacks which have left much of Texas too dry, and Delta regions flooded.

The new crop December lot gained 3.8% to 119.90 cents a pound.

Sugar

also gained, up 1.5% at 21.77 cents a pound for July delivery (although later lots fell) amid growing talk of hold-ups at Brazilian ports.

"The vessel line up is increasing - currently vessels waiting to load 1.93m tonnes of sugar have arrived at Brazilian Center South ports - and the concern this year is that there will be a line up of trucks also waiting to unload at port terminals," Nick Penney at Sucden Financial said.

Chocolate drops

But

cocoa

eased 0.2% to £1,869 a tonne in London for the quite the opposite reason – that shipments were getting underway after disruption caused by internal conflict.

"With a de-escalation in the political turmoil in the Ivory Coast, Ivorian cocoa beans are starting to flow out of the country," Barclays Capital's Ms Unnikrishnan said.

"Production prospects from Ghana look good as well, which should cap upside price gains in the near term."

Commerzbank added: "first vessels laden with cocoa beans have set sail following the export ban and customer sanctions being lifted.

"The quality of the beans does not appear to have suffered from their being stored for several weeks. Stocks in the Ivory Coast will now be reduced, making room for the imminent mid-crop harvest, which should be substantial like the main-crop harvest."

By Agrimoney.com

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