There was quite a currency headwind for Chicago and New York agricultural commodities to overcome to post gains, before getting to any other matters.
The dollar jumped 0.7% against a currency basket, in gains attributed to safe-haven buying sparked by the impeachment proceedings launched overnight against US President Donald Trump.
And a stronger greenback cuts the affordability of exports such as many ags denominated in the currency.
But some ags managed it. Indeed, the Bcom ag index stood marginally higher in late deals.
‘We remain bullish’
Arabica coffee was one such winner, helped in fact by a small gain by the Brazilian real even against a soaring dollar, with the New York December contract ending up 1.8% at 100.95 cents a pound, climbing back above its 50-day moving average.
The gains came as the talk of a drawdown in arabica stocks certified for delivery against New York futures, as reported by Agrimoney on Tuesday, gained momentum.
Rabobank said that “we remain bullish on ICE arabica as the decline in certified stocks combined with the uncertainty on the washed arabica 2019-20 crops will likely support the market”.
In fact, data showed a drop of 15,653 lots in ICE exchange arabica stocks from Tuesday.
That is a hefty decline by recent standards, and only enhanced ideas that buyers may turn to these inventories for supplies, given a 2019-20 deficit in world arabica output (a shortfall estimated at 5m bags by Marex Spectron).
London robusta coffee, by contrast, for which stocks showed only a marginal decline on latest data, and which hare not expected to see such a drawdown, for November eased by 0.6% to $1,309 a tonne.
This despite talk of hoarding of beans by farmers and traders in Vietnam which could cut exports from the top robusta growing country to their lowest since 2011 for this month and next.
Another soft commodity gainer, however, was raw sugar, which for March jumped 2.0% to 12.66 cents a pound in New York, ending back above its 50-day moving average for the first time in two months.
On factor offering support is bull spreading – ie particular strength in the October lot as it approaches expiry, with the contract on Wednesday adding 2.6S% to 11.80 cents a pound.
Its discount to the March contract, at 0.86 cents a pound, has now shrunk 19.6% in a week, and ended back above (or below, depending how you view it) its 200-day moving average for the first time in 2019.
And this despite the huge delivery expected against the October lot, signalling that futures are an attractive place for physical sellers to sell.
Still, one key factor supporting sugar is the huge net short held by funds, a record as of last week, and which looks less sustainable as bullish chart points continue to be breached.
“It seems both sugar bull and sugar bear have arguments, but the massive net spec position makes the short term environment precarious” in terms of the potential for a price spike, said Sucden Financial.
‘Doesn’t look good’
In grain markets, winners included, you’ve guessed it, Minneapolis spring wheat, which soared 1.8% to $5.54 ¼ a bushel for December delivery, taking gains for this month to 11.6%, spurred like sugar by fund covering of a hefty net short position.
That was the best close for a spot contract since June, and was attributed to worries over the latter stages of the US harvest, and the Canadian one, with wet weather setting in, threatening quality as well as quantity.
“Weather problems for North American high protein wheat continues to support Minneapolis,” said Terry Reilly at Futures International.
Benson Quinn Commodities said that “the next week doesn’t look good for the tail end of spring wheat harvest in the US, southern Canada.
“Rain totals could reach a couple of inches, which wouldn’t be good for soybean harvest either.”
However, Chicago soft red winter wheat dropped 0.8% to $4.77 ¼ a bushel, amid ideas of spreading against Minneapolis (short versus long) which has some fundamental basis too, with weather damage to the spring wheat crop meaning more feed wheat supplies.
(It has been a winning bet too, with the premium of Minneapolis over Chicago more than tripling over the past week, December basis, to a four-month high.)
Furthermore, bids to a tender by Egypt’s Gasc reminded of the competitiveness of Black Sea wheat, and French supplies too, the latter of which was offered below $195 a tonne excluding freight.
In fact, late on in the day, Gasc revealed it had bought 60,000 tonnes of French wheat, as well as 240,000 tonnes of Russian (which has quite a freight advantage to Egypt).
The result came after the close of Paris markets, but the list of tenders to the bid, and weakness in the euro, helped the December soft milling wheat contract there end up 0.3% at E170.75 a tonne.
Ethanol production slump
Back in Chicago, corn futures for December eased, but by less than their wheat peer, ending down a modest 0.1% at $3.74 ½ a bushel, after failing earlier to break above their 40-day moving average.
Dismal US ethanol production data for last week – plunging to the lowest in three years - took a bit of a toll, although the data did have a silver lining in that values of the biofuel itself gained 0.7% to $1.381 a gallon, helped by the prospect ahead of dwindling inventories.
That gain, which came despite a 1.1% dip in Brent crude values, will prop up ethanol production margins.
Meanwhile, ideas of a US frost remain on the agenda, albeit with some debate over exactly how significant a freeze could be in terms of ending development of delayed corn and soybean crops.
Futures International’s Terry Reilly highlighted a “frost threat for the northern Plains in the forecast for late next week”.
However, Benson Quinn Commodities was more nuanced, saying that “the GFS model has backed away from the potential frost/freeze event that was hinted at for the northern Plains for October 4 and 5.
“This is in line with the EU model and needed to ensure that a larger portion of the crop reaches maturity in these areas.
“The current forecast still has temperatures that could challenge freezing. It may be a matter of whether or not it clears off at night or not.”
Maxar said that for next week “our forecast shows the potential for subfreezing temperatures across northern North Dakota, far northern Minnesota, far northern Wisconsin, and far western Nebraska.
“These are not major corn and soybean production areas, however,” and “significant crop damage is not currently expected”.
Certainly, the concerns were not enough to keep up soybean futures, which for November ended down 0.6% at $8.89 ¼ a bushel, albeit managing to find some bounce after a fall earlier below their 100-day moving average.
Brazilian weather was also a negative for values, with Benson Quinn Commodities noting that “forecasts offer precipitation for the end of the first week of October and early in the second week”, boding well for an acceleration in the harvest after a slow start.
And while there remain lots of rumours of further Chinese buying of US soybean exports, with latest chatter of purchases from both Gulf and Pacific North West ports, official confirmations remain short of the figures being talked about.
The US Department of Agriculture through its daily alerts system reported 581,000 tonnes in sales of US soybeans to China, compared with some rumours of sales of twice that level.