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Evening markets: Cocoa futures soar on West Africa production curbs. Spring wheat up too

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Some ags managed gains, but it took a good story to do so, to drag investor attention away from a macro focus on central banks, and ideas of easier monetary policy.

 

Cocoa, for instance, had a tale to lure buyers, seeing it close up 2.8% in New York at $2,468 a tonne for December delivery, taking gains this month to 11.1%.

 

The London December contract ended up 1.8% at £1,873 a tonne, up 9.6% for September.

 

Reforms being taken by Cote d’Ivoire and Ghana in an effort to force cocoa prices higher are seen as having some effect.

 

Jack Scoville at Price Futures noted “talk that the governments in Ivory Coast and Ghana are trying to force buyers to pay more to help support minimum pricing schemes that the governments have enacted”.

 

‘Production ceilings’

But the countries’ appreciation that their plans might, in encouraging output, lead to a glut has also helped, with regulators in both Cote d’Ivoire and Ghana revealing that they are looking at a cocoa output curbs to discourage overproduction, and support prices.

 

Joseph Boahen Aidoo, chief executive of Cocobod, the Ghana cocoa board told a conference in Lisbon on Wednesday that the country had introduced a “mechanism which sets production ceilings”.

 

On Thursday, he pegged at 850,000 tonnes the Ghana crop in 2019-20, signalling a bit of a recovery from the 830,000 tonnes estimate for this season (which ends this month), according to the International Cocoa Organization, but a but of a below-par estimate nonetheless.

 

Cocobod had for this season targeted a 900,000-tonne crop, but yields have been curtailed by the spread of swollen shoot disease.

 

Capitulation by holders of speculative short bets is seen as spurring the cocoa price revival, with hedge funds as of Tuesday last week having a net short of nearly 35,000 lots in New York cocoa futures and options, the highest since March.

 

Saskatchewan slowdown

Also showing decent gains was Minneapolis spring wheat, which closed up 1.4% at $5.20 ¼ a bushel for December delivery, as worries over the North American harvest mount.

 

Late in the session, Saskatchewan revealed its harvest was just 23% complete as of Monday – up just 5 points week on week, and less than half the 50% progress usually achieved by then.

 

The spring wheat harvest was just 13% complete – down from 50% a year before.

 

And there look challenges ahead in the Prairies forecast, with Maxar saying that “rains across south eastern Saskatchewan and Manitoba will hamper drydown and harvesting efforts, most notably in Manitoba”.

 

Best for 2019

For Chicago corn and soybeans, help for bulls came in the form of strong US export sales data for last week.

 

Corn’s, at 1,464,566 tonnes, were ahead of market expectations of at best 1.30m tonnes, and was the best performance of 2019.

 

Mexico starred, with purchases of 1.16m tonnes.

 

For soybeans, US export sales last week came in at 1.73m tonnes, beating forecasts of 700,000-1.10m tonnes by a distance, and the best result since March.

 

The sales were “primarily for China”, which took 593,200 tonnes, the USDA said, although adding that Mexico had bought 194,800 tonnes and Egypt 129,100 tonnes (although some of these had already been booked to “unknown”).

 

‘Excellent sales’

“Export sales were excellent for corn, soybeans,” said Terry Reilly at Futures International, adding that they were “good” too for soymeal, at a four-week high of 93,720 tonnes.

Corn futures for December closed up 0.5% at $3.72 ¾ a bushel, with November soybeans also up 0.5%, to close at $8.93 a bushel.

 

Soymeal for December added 0.3% to $296.10 a short ton.

 

Wheat eases

However, Chicago soft red winter wheat futures for December ended lower, by 0.5% at $4.88 a bushel, after US wheat export sales for last week came in short, at a two-month low of 286,589 tonnes.

 

This was behind market expectations of a figure of 300,000-600,000 tonnes, with soft red winter itself accounting for just 33,201 tonnes.

 

Hard red winter wheat accounted for a more respectable (although hardly bumper) 153,948 tonnes, helping the grain show relative resilience, in ending just 0.1% lower at $4.09 ½ a bushel for the Kansas City December contract.

 

That ground the unusually large discount to Chicago soft red winter wheat a touch lower, consistent with ideas as Agrimoney discussed earlier that this gap might have passed its widest.

 

The USDA’s weekly Drought Monitor showed drought remaining a live issue in the southern Plains, where winter wheat sowings for the 2020 harvest have begun, with 51.8% of Texas in drought, and 20.9% of Oklahoma.

 

Paris resilience

Where wheat did fare better was in Paris, where the December lot nudged 0.2% higher to E171.75 a tonne.

 

But then Europe, and of course the Black Sea, are seen as having fared better out of a recent spree of import orders by the likes of Algeria, Egypt and Tunisia.

 

Morocco, on Europe’s doorstep, also cut its import tariff on milling wheat to 35%, from 135%, to encourage imports, after a near-halving to 5.2m tonnes in its cereals harvest this year.

 

Morocco’s state grains agency, ONICL, immediately announced a tender to buy 576,000 tonnes of milling wheat and 35,455 tonnes of durum from the EU, although with a similar tender (heavier on durum) from the US too.

 

“Global demand has continued to help wheat prices off seasonal lows which were brought about by decent harvests in the northern hemisphere”, CRM AgriCommodities said.

 

‘Plenty of competition’

In New York, cotton was on the decline, with the December lot settling down 0.3% at 60.33 cents a pound, after some poor US export sales data for last week, of just over 100,000 running bales for upland and pima combined.

 

The 84,999 running bales of upland cotton sold remains well off the pace, with actual exports of 166,602 running bales the lower of 2019.

 

Signally, the sales figure was held back by net cancellations by Chinese buyers of 39,300 running bales, questioning ideas of strong Chinese orders even if the country does imminently agree a trade deal with the US.

 

“The market worries about demand for what appears to be a good sized crop in the US,” Price Futures’ Jack Scoville said.

 

“There are reports of good crops in other parts of the world as well, so there should be plenty of competition in the world market.”

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