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Evening markets: Coffee futures soar, bucking weakness in grains, cotton, sugar

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That turnaround Tuesday feel evident in early deals spread into later trading too, prompting weakness in grains and, ultimately, cotton too. But not coffee.

 

Chicago corn futures for December closed down 0.8% at $3.41 ¾ a bushel, reversing roughly half of their gains of the last session, although remaining above their newly-regained 100-day moving average.

 

The softness, only the second decline in seven sessions, was instilled in part by overnight US Department of Agriculture data showing that the condition of the US corn crop declined by 2 points last week to 69% good or excellent.

 

This rather than the 3-point drop expected by investors, after the derecho storm through Iowa and parts of Illinois on Monday last week.

 

‘Forecast has added precipitation’

But added to that, bears could count on a retreat in the threats from the Midwest weather outlook.

 

“Yesterday’s forecast offered support [for prices] as it leaned drier through the end of August,” said Benson Quinn Commodities

 

“Today’s forecast has added precipitation for the end of August into early September.”

 

Maxar rated the Midwest outlook as “neutral” overall, saying that the “forecast is slightly wetter in southern Minnesota and northern Iowa”, where rains “will improve moisture a bit.

 

“But dryness continues in north Illinois, north Indiana, south Michigan.”

 

‘Can easily change the mindset’

And then there the whispers from the second day of the Pro Farmer crop tour to factor in, which ended up showing further above-average results in terms of corn yields, and soybean pod counts – this time from Indiana and Nebraska.

 

In east central Nebraska, for instance, the tour pegged corn yield potential at 186.2 bushels per acre, up from 182.66 bushels per acre last year, and a three-year average for the tour of 179.60 bushels per acre.

 

“While crop ratings will remain very much a factor in price discovery as damage reports from the western Corn Belt continue to come in, trade is showing more attention on actual field collected data,” said Karl Setzer at AgriVisor.

 

He pointed too to the start of corn harvesting in the deep south. “While yields in this region do not accurately indicate what we will see in the Corn Belt, they will either verify or discredit the condition reports we have been seeing.

 

“This can easily change the mindset of the entire market.”

 

Soyoil support

Still, corn price losses were limited by remaining crop concerns, and a renewed purchase by China of US supplies of the grain.

 

The USDA unveiled export sales of 195,000 tonnes of US corn to China for 2020-21, plus 130,000 tonnes to “unknown”.

 

There was a 130,000-tonne sale of soybeans too to “unknown”, which was one factor limiting losses in soybean futures for November to 0.2%, leaving the lot at $9.13 ¾ a bushel.

 

That remained comfortably above the 200-day moving average regained in the last session.

 

Also supportive to the oilseed was the bigger-than-expected July US crush number unveiled late on Monday by industry group Nopa, whose data also, in showing lower-than-forecast soyoil stocks, fostered further gains in the price of the vegetable oil.

 

Soyoil futures for December gained 1.2% to 31.90 cents a pound, their best finish in nearly six months.

 

‘Solid yields’

Minneapolis spring wheat proved a rare gainer in the grains complex too, nudging 0.2% higher to $5.21 a bushel for December.

 

This after USDA data showed the US spring wheat harvest, at 30% complete as of Sunday, running 13 points behind the average pace.

 

In the key growing state of North Dakota, the figure was just 19% - 20 points behind average.

 

That said, the condition of the spring wheat crop is strong, at 70% good or excellent, and investors should expect harvesting to “expand quickly this week”, Benson Quinn Commodities said.

 

“Expect to see reports of solid yields with generally good quality noted. I expect the quality will remain pretty good unless there is another rain.”

 

‘EU values are defensive’

Still, it was in fact winter wheat which felt wheat-complex pressure, amid some ideas of spreading against spring wheat, given strong contrary moves between Chicago and Minneapolis so far this week.

 

Chicago soft red winter wheat for December dropped 1.7% to $5.17 ½ a bushel, its first negative close since Wednesday, although managing to recover from early lows to climb back just above its 50-day moving average, at $5.17 ¼ a bushel.

 

“In addition to the normal negative bias that a wheat market gets after a three-day correction,” in this case an upwards correction, “EU values are defensive,” said Benson Quinn Commodities.

 

Paris soft milling wheat for December ended 1.0% lower at E180.75 a tonne, amid some jitters as to whether French wheat will indeed manage such a good showing in the ongoing Algerian tender.

 

Cane rains

In New York, cotton ended lower too, shedding 0.6% to 62.93 cents a pound for December, after early strength which had appeared to defy a surprisingly strong improvement in the US cotton crop rating.

 

And raw sugar fell by 1.3% to 12.89 cents a pound for October, ending back below the psychologically-important 13.00 cents-a-pound mark, despite a last gasp recovery from an intraday low of 12.74 cents a pound set in late deals.

 

As Czarnikow noted, this week speculators “have eased on the buying with the news of persistent rain reaching the states of Paraná, São Paulo and Mato Grosso do Sul over the weekend and, in fact, a foresight of these continuing through the week”.

 

As Maxar noted, “ongoing showers and rain are expected to develop in Parana , Sao Paulo, and Mato Grosso do Sul through the end of the work week” – moisture which, while it will slow cane harvesting, will ameliorate worries over damage to cane yields ahead from persistent dryness.

 

Highest of 2020

New York arabica coffee bucked the negative trend by soaring 3.1% for December delivery to settle at 121.05 cents a pound, maintaining its lead above its upward-trending 20-day moving average.

 

November London robusta futures ended up a more modest 1.3% but, at $1,396 a tonne, managed the best close of 2020 for a nearest-but-one contract – if failing narrowly to hold on above the key $1,400-per-tonne mark.

 

“It appears that the record Brazilian crop has already been priced into the market, so the prospects for improving demand can help coffee extend its recovery move,” said ADM Investor Services.

 

“Stronger-than-expected demand has been reflected in this month’s sharp drop in ICE exchange [arabica] coffee stocks, which fell another 21,552 bags on Monday to reach a multi-year low.”

 

Stocks fell a further 5,578 bags on Tuesday, according to exchange data released after the market closed.

 

‘Bulls will see this as bullish’

US green coffee stocks data released overnight by the Green Coffee Association, showing a drop of 6,849 bags in July to 7.054m bags, were also in focus.

 

“Bulls will see this as bullish since a year ago stocks rose by 279,052 bags,” said analyst Judith Ganes Chase.

 

“There is a tendency for July stocks to increase but fall from August onwards.” Yet they have fallen this time, even amid the mooted dent to coffee demand from Covid-19 factors.

 

Still, Ms Ganes Chase added the rider that “there are supply chain adjustments that are ongoing and I don’t see this as necessarily proof positive that demand is strong.

 

“There are still large segments of the industry that are hurt even as some of the economy started to open.”

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