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Evening markets: Cocoa, coffee star, as ags maintain upswing

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Ag trading wasn’t exactly humming, with US markets closed for the Independence Day holiday.

 

But what activity there was was largely upward, pushed by some of the ripples left from the last session, when the likes of coffee and corn made quite a splash by posting decent gains.

 

‘Biggest cold wave in six years’

In London, robusta futures extended the coffee market’s winning streak by closing up 1.4% at $1,474 a tonne for September delivery, closing back above their 100-day moving average for only the third time in seven months.

 

Worries remain over cold weather in Brazil, with Somar terming low and potentially freezing temperatures due this weekend “the biggest cold wave in six years”.

 

“On Saturday, the minimum temperature varies between 0-4 degrees Celsius in the north of Paraná and Alta Paulista,” the weather service said.

 

On Sunday, “there is a minimum temperature forecast between 0-4 degrees Celsius with potential for weak frosts in Mogiana, southern Minas Gerais and Cerrado,” Minas Gerais being Brazil’s top (arabica) coffee-growing state.

 

That said, Somar said that what was gaining attention over the cold snap was the breadth of its coverage, rather than the “severity of the cold”.

 

‘Fundamentals remain bearish’

Also in London, feed wheat gained too, although by a modest 0.2% to £150.25 a tonne for the November lot, (although this was enough to take the contract back above its 50-day moving average).

 

Paris milling wheat for December gained 0.4% to E183.75 a tonne.

 

Sure, there remain reasons to be cautious on prices, with UK-based ADM Agriculture, for instance, noting that Europe’s “recent heatwave quickly abated, lessening the threat of any substantial damage to the EU’s grain crop.

 

Indeed, “market fundamentals remain bearish”, said the merchant, formerly called Gleadall.

 

“EU production is set to rebound, and price levels are not only undercut by Black Sea prices, but also by new-crop imported maize.”

 

‘Underpinned’

However, it is quite a help when US markets performed so strongly in the last session.

 

Agritel said: “The European market has been underpinned by the better performance seen in Chicago”.

 

The analysis group highlighted “persisting fears for the [US] corn crop”, after the worst spring sowings season in recent history, and growing “doubts about the reliability of the last USDA’s statement for corn and soybean acreage”.

 

While the US Department of Agriculture last week came in with an unexpectedly large figure for US corn sowings this year, there are plenty of commentators saying that the figure was exaggerated, being based largely on a survey taken early in June, when farmers still had hopes for corn area which likely ended up unrealised.

 

‘Capping the potential’

Paris rapeseed managed marginal gains too, adding 0.1% to E364.75 a tonne for August delivery, finding a little strength from the last session’s gains in rival oilseed in Chicago, to counter downward pressure from palm oil.

 

Earlier, palm oil for September settled down 0.3% at 1,950 ringgit a tonne in Kuala Lumpur, weighed by a return to weakness in crude oil futures, which are key to values of an ag commodity used largely in making biodiesel.

 

(The palm oil-gasoil, or “pogo”, spread is discussed elsewhere on Agrimoney.)

 

Agritel said: “Palm oil remains weak, and is capping the rising potential of rapeseed despite a smaller European [rapeseed] crop” expected this year than in 2018, a dynamic which suggests “that canola imports will be necessary”.

 

Hot cocoa

Back in London, white sugar futures for August ended $0.10 higher at $320.30 a tonne, supported by the 1.5% gains in October New York raw sugar in the last session, and by data showing that India received below-average rains for a fifth successive week.

 

That said, the deficit narrowed to 6% for the week to July 3, compared with the total 28% shortfall since the monsoon season kicked off at the start of last month.

 

London cocoa futures for September gained 2.2% to £1,848 a tonne, and in relatively good volumes (marginally higher the last session), amid continued upbeat talk on values, now that Cote d’Ivoire and Ghana have agreed a $2,600-a-tonne price floor.

 

Furthermore, there remain worries of a sharp downturn in Cote d’Ivoire output in 2019-20, as Rabobank has highlighted.

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