Wheat, and coffee, bulls took aim at a happy Thanksgiving week.
Arabica coffee futures for March jumped by 2.8% to 118.90 cents a pound in New York, a fresh one-year closing high for a nearest-but-one contract, and taking the lot’s gains for this month above 15%, headway attributed in part to concerns over next year’s harvest in Brazil, the top producing country.
“The coffee market continues to find support from hot and dry weather in some key areas of Brazil which is bringing about talk of smaller production for the 2020 crop,” said ADM Investor Services.
‘Exports getting off to a slow start’
However, there are also concerns over how much coffee is around for feeding supplies until then.
In Brazil, export “registrations slowed… this week and are currently on track for 3.1m bags in November,” a figure which would be down some 300,000 bags month on month and 800,000 bags year on year, said Marex.
“This would put year-to-date shipments down 0.5m bags after the first five months of the crop year,” which starts in July in Brazil.
This as overall “global exports are getting off to a slow start in 2019-20.
“Provisional data indicates that shipments will be about 1m bags less than in October 2018 and only a little up on last month’s very low total,” the trading house said, estimating world exports last month at about 9.5m bags.
‘Demand exceeds supply’
Meanwhile, adding to a picture of somewhat tighter supplies, US stocks, as measured by the Green Coffee Association, “have now started to decline as spot demand exceeds supply”, a trend Marex saw continuing through the quarter.
(In fact, there has been something of a seasonal trend of late of weaker stocks around the turn of the year.)
ADM Investor Services said that “global demand has been showing signs of the improvement for several months, but is now becoming a front and centre issue for the coffee market.”
Still, in London, robusta coffee for January added a more modest 1.1% to $1,418 a tonne, remaining below even its high for this month.
There are ideas that a downturn in exports from top producer Vietnam will not last.
ADM noted a report that Vietnam’s Coffee and Cocoa Association, Vicofa, “forecast their nation’s coffee exports this season would increase 5% from last year, but that this month’s exports may fall more than 20% from last year’s total due to harvest delays”.
Meanwhile, in Chicago, it was wheat which was attracting buying.
And in decent volumes too this session, although cautions abound that, with US Thanksgiving on Thursday, activity is poised to dry up (a factor which can itself, of course, promote movement in prices).
Karl Setzer at Agrivisor, for instance, said that “trade volume will be quite thin this week due to the Thanksgiving holiday trade,” which sees US grain markets closed on Thursday and only for a limited session on Friday.
“While this can reduce trade volume, it can create volatile trade.”
Spicing up the situation too from the calendar side are looming month end, which often sees investors close positions, and on Friday first notice day for December contracts in the likes of corn, wheat and soyoil.
“We’re going to lose two days to make the roll from December 2019 to March corn 2020,” said Mike Zuzolo at Global Commodity Analytics.
“That means to be clear by Wednesday’s close - and I’d prefer starting today given possible liquidity issues later in the week.”
‘Area below last year’
Still, there was some fundamental cause too to buy wheat, with weather setbacks noted in many major growing areas, including the European Union, where the official Mars agrimeteorology bureau on Monday highlighted setbacks to winter crop sowings from persistent rains.
“In the UK, Ireland, the Benelux countries and northern Germany, where wet weather had hampered the start of the sowing campaign, abundant rain continued,” and “due to the decrease in soil temperatures, the sowing window can now be considered closed,” Mars said.
In the UK, Ireland and the Benelux nations, “the projected area of winter cereals is below last year”, while in France too where “drilling continued to be difficult and has been interrupted by abundant rainfall… the area is expected to decrease compared to last year for soft wheat”.
The bureau said that German area was expected to stay “fairly stable”.
‘Too much wet weather’
Meanwhile, worries remain over dryness for winter crops seeded in Ukraine, while in Russia, SovEcon said that “current low moisture reserves imply that fields will need more precipitation during the winter and spring”.
That said, the analysis group added that "despite the recent dryness, crop conditions are generally good thanks to some rains and warm temperatures which helped crops to develop before the winter”.
And in the US, there are worries too, with CHS Hedging flagging “concerns grow that there could be too much wet weather for the winter wheat crops before they go dormant”.
There are expectations of some area going unseeded too, given the slow progress of the US corn and soybean harvests, which face further hindrance this week, preventing follow-on winter crop seedings (where intended).
In the Midwest, “snow in north western areas will stall remaining corn harvesting, while rains in central areas slow fieldwork there as well,” Maxar said.
Chicago soft red winter wheat for March closed up 2.7% at $5.33 a bushel, the best close – but one – for a second-in contract in five months.
This time, Kansas City hard red winter wheat outperformed, adding 2.8% to $4.45 ¼ a bushel.
It was potentially helped by late-month, pre-expiry positioning closing, with funds having a far larger net short in Kansas City than Chicago wheat.
Minneapolis spring wheat for March, naturally, continued its underperformance as discussed earlier, ending up 1.1% at $5.12 ¼ a bushel, and so extending its unusual discount to Chicago.
Paris soft milling wheat for March gained 1.1% to E183.00 a tonne, climbing back above its 200-day moving average.
‘Favourable for planting’
Chicago soybean futures, meanwhile, ended for January down 0.4% at a two-month low of $8.93 ¼ a bushel, extending their fall below the psychologically important $9.00-a-bushel mark, which they surrendered in the last session.
And this despite some strong US export data for last week, of 1.94m tonnes, above expectations of 1.20m-1.80m tonnes, and up 400,000 tonnes week on week.
Furthermore, the US Department of Agriculture said it had wrongly in daily alerts last week attributed to corn, rather than soybeans, 223,000 tonnes in US export sales.
On the downside for prices, the South American weather outlook was seen as benign, with Benson Quinn Commodities saying that it “looks favourable for planting and establishment in most areas”.
And there was talk of Chinese buyers reverting to South America for supplies, given hold-ups in China-US trade talks.
‘Low test weights’
Corn futures, however, managed 0.5% gains to $3.80 ¾ a bushel in Chicago for March delivery, helped up by rival grain wheat, and taking more notice of delays to the US harvest, which is less far through than for soybeans, so more vulnerable to future Midwest weather.
And then there are worries over what has been harvested.
Agrivisor’s Karl Setzer noted that “more reports are being made of high moisture and low test weights on later-harvested bushels, and even that some bins have already taken on moisture after being dried”.