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Evening markets: Cocoa futures leap ahead. Grains shuffle higher

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How long is it going to be before stories of soaring chocolate prices for Easter reach wider news sites?


Maybe that will, in fact, be the sell signal for cocoa futures, which extended their rally on Monday, far outpacing the likes of soymeal and wheat, which have also been in demand of late.


Cocoa for May settled up 3.3% at $2,546 a tonne in New York – taking to nearly 35% its gains so far in 2018.


The gains, which also gave cocoa its best close in 16 months on a nearest-but-one contract basis, reflected yet further concerns over West African supplies, after Cocobod, the Ghanaian cocoa marketing board, pegged domestic output this season at 700,000 tonnes.


That is well below an initial forecast of 850,000 tonnes, with the shortfall reflecting disappointing rains during the main crop harvest in Ghana, the second-ranked cocoa growing country.


London cocoa for May gained 2.9% to £1,791 per tonne, a 13-month high for a nearest-but-one lot.


‘Topic that will debated


‘However, in Chicago, soymeal, the toast of grain markets until last week, for May closed down 0.9% at $370.40 a short ton, now down 8.3% from a high set 10 days ago.


The concerns are waning over a dearth of soymeal exports from top shipper Argentina, which is seen as having plenty of soybean stocks to cover a drought dent to this year’s harvest.


“As long as Argentina’s soybean crop is larger than 44m tonnes several analysts do not believe we will see much for a change in the Argentine balance sheets this year,” said Karl Setzer at MaxYield Co-operative.


“This is a topic that will debated for the next several months, and likely all the way through the Argentine marketing year.”


China import debate


As an extra setback, (relatively small levels of) surprising Chinese soymeal exports are emerging on the horizon.


“Traders are increasing their estimates for Chinese soymeal exports to 2m tonnes, compared to 1.1m tonnes last year, due to a smaller Argentina soy crop,” said CHS Hedging.


The upside for prices of soybeans themselves is that this may require extra imports, and in fact a separate report emerged from Reuters in Singapore, quoting a “senior industry analyst” as saying that China’s 2017-18 soybean imports will top 100m tonnes.


The estimate, attributed to “strong demand for animal feed”, compares with a USDA forecast of 97.0m tonnes.


‘Where will the soybeans be sourced from?’


“While this is positive news, the real question is where the soybeans will be sourced from,” MaxYield’s Karl Setzer said.


“So far, it appears as though the majority of the business will go to Brazil,” although the USDA did issue some relatively upbeat comments on US soybean export prospects for the rest of 2017-18, as reported elsewhere on Agrimoney.


Soybean futures themselves for May closed up 0.2% at $10.41 a bushel, their first gain in five sessions, and curtailing to 2.8% their retreat from a March 2 high.


Chicago soyoil futures for May were a help in this, adding 0.4% to 31.75 cents a pound, recovering from a nine-month closing low for a nearest-but-one contract, helped a little bit by gains in rival palm oil, but also what looked like unwinding of long soymeal- short soyoil spreads.


Weather debate


As for the weather forecast in Argentina, there were discrepancies, at least in stress and interpretation.


At Halo Commodity Company, Tregg Cronin flagged a “forecast for widespread, soaking rains in the Argentine growing region Friday-Sunday.


“Coverage on 100% of the [corn, soybean] belt between the two systems hasn’t been seen in months, and could help avert further losses to corn and soybean crops.”


Richard Feltes at RJ O’Brien said that the “weather leans negative” for prices “with Argentine dry areas shrinking over the next 10 days, although very little relief is expected over the next five days (only 25% coverage).”


However, Benson Quinn Commodities focused on “unfavourable” weather conditions early this week in Argentina, and the US southern Plains too, where dryness has been testing wheat crops.


While it added that “there are better prospects for moisture in both areas going forward… moisture would be too late for a good portion of the Argentine crop and the current forecasts do not indicate much relief for the primary hard red winter wheat growing areas”.


Import tenders


In fact, Kansas City hard red winter wheat futures for May added 0.3% $5.22 ¼ a bushel, hardly a large gain, but representing a substantial recovery from the $5.13 a bushel reached earlier.


And Chicago soft red winter wheat for May added 0.4% to $4.90 ¾ a bushel, recovering from an early low of $4.83 a bushel.


Wheat futures were depressed earlier after regulatory data showed large buying in Kansas City futures and options, and short-covering in Chicago, meaning less buying pressure left unfulfilled than some investors had expected.


There was also help from evidence of importer demand, with both Algeria and Iraq in the market with tenders.


‘Reserves are seen dropping’


On corn, the USDA was able to announce some actual order wins for US supplies, of which 107,752 were purchased by Japan, and a further 254,800 tonnes for “unknown”.


CHS Hedging, meanwhile, flagged that “Chinese corn reserves are seen dropping due to positive ethanol policies and fewer corn acres expected to be planted”.


But futures struggled under the weight of fund buying that has already occurred, and ended uop a modest 0.25 cents at $3.90 ¾ a bushel.


“I expect the corn market to correct as the funds have gotten quite long,” Benson Quinn Commodities said earlier.


“But, I would be surprised to see the funds want to liquidate a large portion of their length at this point.”

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