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Evening markets: Brazil data lift sugar prices. US sales boost wheat

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There were buyers to be had in agricultural commodities.

 

But it needed a good story.

 

Sugar had one, in a caution by Conab over the quality of Brazilian cane.

 

Although the bureau raised its forecast for the all-Brazil cane crush this season, putting an increase on the cards, it trimmed expectations for sugar and ethanol output nonetheless, seeing lower concentrations of sugars in the crop.

 

And with futures anyway looking to have hit something of a floor in New York, some of the holders of the (substantial) speculative short in raw sugar futures and options cashed in gains.

 

New York raw sugar for October closed up 1.7% at 11.58 cents a pound.

 

‘Could lead to less production’

That headway looked even more impressive when weighed against a tumbling real, which slumped by 1.1% against the dollar, reversing most of the gains of the previous two sessions to return close to three-month lows.

 

A weaker real cuts the value in dollar terms of assets over which Brazil has a large influence.

 

These include coffee too, yet the New York December arabica contract managed gains, if less impressive ones, settling up 0.7% at 97.30 cents a pound, continuing to find some support from ideas that more risk premium could be warranted, given worries that dry Brazilian weather could bring failure of some early blossoms.

 

Jack Scoville at Price Futures noted too that “ideas are that the recent [Brazilian] freeze did nothing to hurt the current crop but could lead to less production for the next crop”.

 

(To be clear, ideas remain that the Brazilian harvest in 2020, an “on” year in the biennial cycle, will grow year on year, but maybe not by as much as some initial forecasts.)

 

‘Decent’ sales

Among grains, meanwhile, it was wheat which achieved gains, with the Chicago December soft red winter wheat contract ending up 0.8% at $4.71 ¾ a bushel.

 

That followed US export sales data for last week which, at 594,600 tonnes, were ahead of market expectations of at best a 500,000-tonne figure.

 

Actual shipments were strong too, at 659,528 tonnes, the best figure but one for the US 2019-20 season (which started in June), and termed “decent” by Benson Quinn Commodities, and “good” by Terry Reilly at Futures International.

 

Cumulative shipments, at 5.46m tonnes, are up 28% year on year.

 

As an extra help drought is spreading through the southern Plains – affecting 32% of Texas and 11.9% of Oklahoma – just as farmers are thinking about plantings of winter crop for the 2020 harvest.

 

‘Don’t offer much’

However, for corn, the US export sales data were less impressive, at 119,300 tonnes for old crop and 301,600 tonnes for 2019-20, although combined “were near the lower end of expectations”, Mr Reilly said.

 

“Export sales don’t offer much,” CHS Hedging said.

 

And, indeed, December futures ended up just 0.1% at $3.71 a bushel, finding little support either from the ProFarmer tour, which many investors see showing corn crops maybe not as good as the USDA expects, but not with sufficient shortfalls to warrant too much excitement.

 

“Crop tour corn yields in the western Corn Belt are good,” Mr Reilly said.

 

CHS Hedging noted that in Iowa, “corn yields in the south west corner were estimated at 186.28 bushels per acre, versus 179.82 bushels per acre last year, and versus the three-year tour average of 185.78 bushels per acre”.

 

At AgriVisor, Karl Setzer said that “we are seeing bigger yield estimates as tours move into the heart of the Corn Belt, which is not surprising.

 

“The question now is if these areas are good enough to compensate for the losses in others to give us the crop size currently being predicted.”

 

Soy slips

Soybean futures for November fell by 0.5% to $8.68 ¾ a bushel.

 

Sure, if the ProFarmer tour has revealed production worries, it is over soybeans rather than corn, with pod counts coming in below normal levels – even in the western Corn Belt.

 

Nor, it has to be said, were US export sales data for last week for the oilseed were too bad, at 792,600 tonnes for new crop, plus 25,900 tonnes for soon-to-finish 2018-19.

 

Investors had expected at best 100,000 tonnes for old crop, and 350,000-700,000 tonnes for new.

 

The new crop figure included a rare cargo, of 66,000 tonnes, sold to China too.

 

Export dynamics

However, the performance was not enough to ease worries over US soybean trade ahead.

 

“US new-crop soybean commitments of 5.26m tonnes for this time of year are running at their lowest level since the 2006-07 season,” Mr Reilly said.

 

Furthermore, China’s purchases from South America are dwarfing those from the US, spurring ideas that even if the US and China do settle their trade dispute, it will not have that much of an impact on US soybean shipments for now.

 

“China bought at least nine cargos of South American soybeans overnight for mostly October and some November shipment, even though the landed import price of soybeans continues to rise to multi-month highs,” Mr Reilly said, noting Argentina, Brazil and Uruguay as the origins.

 

‘Up to 50 cargos’

Such talk was backed by CHS Hedging, which said that “China has been very active buying cargos of soybeans from South America.

 

“Trade talk yesterday had the Chinese buying 9-10 cargos on Tuesday afternoon.

 

“Some in the trade are estimating that the Chinese have bought up to 50 cargos of South American soybeans since late last week.”

 

It was little help that futures in both products fell, with soymeal for December ending down 0.4% at $299.30 a short ton, and December soyoil by 0.9% at 28.65 cents a pound.

 

This despite a 2.2% surge overnight to a six-month closing high of 2,256 ringgit a tonne in Kuala Lumpur palm oil, on ideas of weaker Malaysian production in a period which is close to the seasonal peak.

 

‘Quite disappointing’

Back in New York, cotton futures for December dropped 1.7% to 58.94 cents a pound, undermined by export sales data for last week of 164,000 running bales for upland cotton – half those of the week before.

 

The figure undermined ideas of weak prices spurring demand.

 

The data were viewed as “quite disappointing” and “bearish” by Louis Rose Commodity Group, who added that export sales were running below the pace needed to meet the USDA’ forecast for US shipments in 2019-20 of 17.2m running bales (including pima cotton).

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