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Evening markets: crops extend losses, amid quarter-end theme

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Are financial markets, as well as crops, seasonal?

GrainAnalyst trader Matthew Pierce floated the idea, noting apparently sensitive calendar points for risk investors.

"It may be a coincidence but both of the recent macro flushouts have occurred right before a quarter end," Mr Pierce said, with late June witnessing a sell-off too.

Whatever, "this is a moneyflow issue to watch heading into the end of the year" too, bringing with it the close of the next quarter.

Not that investors have got over the forthcoming quarter-end one yet, with markets adopting a pretty typical "risk-off" pose which involves selling of the likes of agricultural commodities.

'The fear'

The

dollar

, as a safe haven investment, added 0.3%, weakening the competitiveness of dollar-denominated assets such as many commodities in the process.

Indeed, the average raw material lost 2.1% as of 17:40 GMT (18:40 UK time, 13:40 New York time), according to the CRB index.

And many farm commodities were outperformers in the negative sense, heading into closing deals, as extra reasons for caution weighed – a big one being the US Department of Agriculture's quarterly US grain stocks report, this time as of September 1, due on Friday.

US Commodities reported investor fears that feed demand for

corn

has faded "as feed

wheat

became readily available".

The broker added: "Thus the fear is ending stocks [for 2010-11] will grow" in Friday's report, with September 1 being the first day of 2011-12 for corn and

soybeans

.

'Path of least resistance lower'

Then there is harve

s

t pressure to take account of – especially when yields are in many areas of the US, apparently, not turning out as bad as had been feared.

"The path of least resistance is lower when we are the depths of harvest and that is clearly true this year," Darrell Holaday at Country Futures said.

"In addition, there are many who will deny this, but the reality is that yields on corn and soybean yields are better than expected in a significant part of the Midwest."

Weather for harvest is looking good too, with conditions in the eastern Corn Belt "expected to dry out, which should allow for a rapid advance of the row crop harvest".

Price falls

The weather outlook was not all helpful, bringing the prospect of more dry weather to the US South, so reducing prospects further for hard red winter wheat sowings (although the possibility of claiming insurance if rains don't come make these a winner anyway).

Still, with China still not appearing on the buyers list for US corn, and with a national Chinese holiday next week potentially keeping the country sidelined, investors had enough ingredients to get selling.

Corn for December stood 2.4% lower at $6.42 ½ a bushel, with three-quarter of an hour or so trading to go, with Chicago wheat for December down 3.0% at $6.32 ¾ a bushel, continuing to rebuild a premium against its fellow grain.

November soybeans tumbled 3.1% to $12.24 ½ a bushel.

Sugar turns sour

Soft commodities weakened into the close too as the liquidation theme gathered momentum.

Raw

sugar

stood 1.5% lower at 25.64 cents a pound in New York for October delivery, giving back about half Tuesday's gains, amid slightly less dire prospects for top producer Brazil.

"Expectations have been improving on the outlook of the current crop thanks to better yields, as much of the damaged cane has already been processed," Rabobank said.

New York

coffee

for December fell 3.3% to 232.95 cents a pound, with weather models suggesting the start of the Brazilian rainy season next month, boosting flowering prospects.

'Demand side uncertain'

December cocoa dropped 2.8% to $2,682 a tonne in New York, continuing its decline under the weight of increased expectations for West African output.

"The bearish West African 2011-12 crop looks to be larger than initial expectations alleviating concerns that the political crisis in Ivory Coast damaged production potential," Rabobank said.

"Risks associated with weather have eased as the important August-September period has passed with generally favourable conditions."

Meanwhile, "demand side fundamentals remain uncertain given the general state of the global economy".

By Agrimoney.com

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