Coffee and cocoa futures managed decent gains, to help keep the ag complex on course for its highest finish in nearly six months.
Cocoa futures for December soared 3.3% to settle at $2,623 a tonne in New York, their highest finish in six months, helped by concerns over West Africa, responsible for some two-thirds of world production.
“Dry conditions in West Africa, tightening exchange stocks and renewed political instability in Ivory Coast are bullish factors for the cocoa market,” said ADM Investor Services.
The broker noted too reports that cocoa output from Nigeria, the world’s fifth largest producer, “is expected to drop 20% in 2020-21 due in part to limits on inputs resulting from measures aimed at curbing the spread of coronavirus and also due to weather at harvest”.
‘Worries about the next crop’
Jack Scoville at Price Futures underlined that “there are worries about the next crop due to dry conditions in West Africa”.
Reportedly, “the Nigerian harvest will be delayed by at least a month due to dry weather keeping the pods and beans small and keeping the pods from developing normally”.
London cocoa futures for December ended up 2.4% at £1,762 a tonne, a five-month closing high, weighed in part by strength in sterling against a dollar weakened by comments from Federal Reserve chairman Jay Powell that the central bank was taking a more relaxed position over inflation .
Against the Brazilian real, the dollar’s decline was downright dramatic, with the greenback tumbling 2.7%, so boosting the value in dollar terms of assets over which the South American country has a large influence.
Indeed, that was one reason why New York arabica coffee futures for December closed up 3.3% at 126.35 cents a pound, a five-month closing high.
Indeed, the gains ended a week during which “prices were driven by purchases of funds and loss of strength of the dollar”, according to Brazil’s CNC producers’ group.
Furthermore, the group noted support from “the drop of more than 1m bags in ICE US certified stocks” over the past year, to multi-year lows, “and the fact that Brazilian producers have stopped selling part of up to the next three harvests, suggesting firm demand”.
London robusta coffee for November ended up 1.7% at $1,429 per tonne, the best finish of 2020 for a nearest-but-one contract.
Not that all softs were so strong, with December cotton futures closing own 0.5% at 65.05 cents a pound????? As worries eased over US crop harm from Hurricane Laura.
“It appears that Hurricane Laura went through without causing much damage to the US cotton crop, and so far the rains do not appear heavy enough to cause widespread flooding in cotton fields,” said ADM Investor Services said.
Plexus Cotton said that “two tropical systems caused the market to trade in typical ‘buy the rumour – sell the fact’ fashion this week, and now that the storms are gone without inflicting much harm, we might see prices pull back some more from here”.
That said, chiming with some comments debated earlier, over ags being a hedge for inflation, the merchant added that “the market is still lacking any significant selling pressure, as speculators have jumped on the bullish bandwagon and index funds are still seeing positive money flows”.
Oil vs meal
Sticking with the bullish bandwagon theme – and the prospect of the best close by the Bcom ag subindex since early March – Chicago soymeal futures for December soared 2.1% to $304.10 a short ton, their highest finish in nearly five months.
The gain had a whiff of late-month position closing, framed in terms of the recent outperformance of soyoil, as both soybean processing products have been boosted by the disappointing supplies in top exporter Argentina thanks to farmer hoarding of the oilseed.
Soyoil itself for December ended down 0.8% at 33.24 cents a pound.
“Soybean oil is giving up ground over meal on profit taking,” said Terry Reilly at Futures International.
“Offshore values for the week indicate values for soyoil are overvalued relative to meal.”
The share of oil as the total value of soybean processing products touched a seven-month high of 0.3579 before tumbling to end at 0.3488.
‘China could import 20m tonnes’
Soybeans themselves for November sided with meal, ending up 0.9% at $9.50 ½ a bushel, a seven-month closing high.
This as some concerns remain about Midwest weather, with Mxar forecasting that while “showers are expected across the northern and eastern Midwest, which will favour late crop growth… below-normal rainfall will continue across Nebraska, Iowa, and southern South Dakota”.
Chicago corn for December found a little support too, adding 0.2% to $3.59 ¼ a bushel, also helped by a fresh sale of US corn, 324,032 tonnes, to “unknown”, who many presumed to be China.
“More people are getting on board with ideas that China could import 20m tonnes of corn,” said Benson Quinn Commodities, noting that “they’ve been buying US and Ukraine” supplies.
Hard vs soft
But Chicago soft red winter wheat lost early headway to end down 0.4% at $5.48 ¾ a bushel for December, its first losing session in four, as rumours of Chinese buying of US wheat went unconfirmed yet again.
Some late-month spread unwinding looked in evidence here too (as in soyoil-soymeal) with hard red winter wheat for December outperforming in ending unchanged at $4.72 ¼ a bushel.
The spread between the two ended at $0.76 ½ a bushel, right on its 100-day moving average, which it had not closed above since June.