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Evening markets: Coffee jumps to one-year high. Corn finds buyers too

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Are US corn exports turning a corner?

 

After their dismal start to 2019-20, they reached 788,022 tonnes last week, US Department of Agriculture data showed.

 

While remaining within the range of market expectations of 400,000-900,000 tonnes, the figure was, as the USDA noted, “up 36% from the previous week and 49% from the prior four-week average”.

 

Rash of orders

Furthermore, actual shipments were strong too at 673,060 tonnes, a touch firmer than the 637,000 tonnes indicated on Monday by cargo inspection data, and the best result of 2019-20.

 

And the USDA announced too through its daily alerts system the sale of 106,000 tonnes of US corn to an “unknown” import destination.

 

That is the third USDA corn sales announcement this week, totalling 429,000 tonnes, all to “unknown”, and follows just one such alert over the previous month.

 

‘Bid jumped’

The improvement - which follows broker comment of improving competitiveness of US corn on international markets, as South American supplies run seasonally down, and Argentina too faces the uncertainty of a potential crop export tax hike next month – comes amid continued talk of a firm US cash market too.

 

Mike Zuzolo at Global Commodity Analytics highlighted “improving basis in key locations like central Illinois.

 

A client called and told me that his Decatur, Illinois bid jumped to $0.25 a bushel above futures for December.”

 

Karl Setzer at Agrivisor said that “one benefit to corn is that harvest has been delayed, easing [downward] pressure on basis”.

 

Chart signal

Such dynamics helped Chicago corn futures gain 0.5% to $3.68 ½ a bushel for December delivery.

 

And this at a crucial time from a technical perspective, according to analysis of the continuous price chart.

 

“December corn is trying to hold onto the topside of the gap” formed in the chart last month.

 

“Why the gap level is so important is that it also a 38% Fibonacci retracement from the high of the August USDA Wasde report day to the low on September 9.

 

“If this support does not hold the next level of support is at $3.57 a bushel.”

 

Still, of course plenty of tests like ahead, such as options expiration on Friday, first notice day for December futures on November 29, and US Thanksgiving in between.

 

“There will be a lot of repositioning as the market officially enters the holiday season,” CHS Hedging added.

 

Deal-off

And, of course, there is the wayward course of China-US talks to factor in too, with Thursday something of a “deal-off” session.

 

While, on the positive side, China has reportedly invited a US delegation over for talks, on the negative there was the passing by the US House of a bill supporting Hong Kong protesters.

 

“The bill will now go to President Trump, which he is expected to sign,” said Benson Quinn Commodities.

 

After a negative session for Hong Kong and Shanghai shares, prices of ags such as soybeans particularly exposed to China-US relations fell.

 

‘Producer selling has picked up’

Chicago soybean futures for January closed down 0.5% at $9.01 a bushel, their weakest finish since September.

 

And this despite US export sales of 1.52m tonnes for last week, “up 22% from the previous week and 39% from the prior four-week average”, the USDA said.

 

Karl Setzer at Agrivisor said that “the concern is that China will start sourcing soybeans from South America without an agreement, and our demand will again fall”.

 

At Futures, International, Terry Reilly said that “USDA export sales were good for soybeans, but the trade remains focused on ongoing US-China trade concerns.

 

Furthermore, investors are looking at “US producer selling that has picked up over the past two days amid an increase in harvest progress”.

 

‘High end of expectations’

Nor could Chicago soft red winter wheat futures sustain early gains, ending down 1.5% at $5.12 a bushel for March, with roughly half that fall coming in the last 15 minutes of trading.

 

Whether this was down to some positioning ahead of tomorrow’s options expiration, or next week’s Thanksgiving, or to ideas of Russia and its huge exportable surplus regaining export market competitiveness…

 

US export sales data for last week – at 437,700 tonnes “up 83% from the previous week and 29% from the prior four-week average” – had been viewed positively, with Terry Reilly noting they were “at the high end of the range of expectations”.

 

Meanwhile, Mike Zuzolo noted that in the US “cash prices in both St Louis and at the Gulf are strengthening not weakening”.

 

‘Serious hurdle’

Furthermore, there was a warning from Kansas Wheat over the threat from dryness to winter wheat seedlings (sown for 2020 harvesting) in the state, the top US wheat grower.

 

“While subsoil moisture is adequate in many areas of the state, the moisture below our feet is quickly being used up while the top soil statewide is ‘bone dry’,” the industry group said, adding that “the lack of moisture is a serious hurdle for newly planted and emerged wheat”.

 

“This is a stark contrast to last year when substantial rains led to delays in fall harvest which meant that many expected acres of wheat were left unplanted.”

 

Kansas City hard red winter wheat, as grown in the state, at least managed to outperform its lower-protein Chicago peer in closing down a more modest 1.0% at $4.28 ½ a bushel.

 

Cotton dips

Among New York soft commodities, cotton futures felt the pressure of China-US deal worries, with the March contract ending down 0.4% at 64.01 cents a pound, ending below its 50-day moving average for the first time in nearly two months.

 

US export data were mixed, in that sales for last week came in at 227,600 running bales for upland cotton, down 34% week on week, although still 20% above the prior four-week average.

 

Still, actual shipments improved a little to 137,866 running bales.

 

Louis Rose at Rose Commodity Group deemed the data “neutral to supportive” for futures, adding that “sales were again well ahead of the average weekly pace required to meet the USDA’s 16.5m-bale export projection [for 2019-20, while shipments were only around 40% of the pace requirement”.

 

Hot coffee

However, arabica coffee maintained, and even expanded, its extraordinary volatility of this week, ending up 4.8% at 116.25 cents a pound for March delivery.

 

That performance – which followed a 4.5% jump in the last session, and a 2.8% tumble on Tuesday - was the highest finish for a nearest-but-one contract in a year.

 

It was a help that the USDA’s Sao Paulo bureau cut its estimate for the latest Brazilian coffee harvest and, importantly, the forecast for 2019-20 exports too to a level which implies a steep year-on-year decline until the end of the season (in Brazil) in June.

 

The weather outlook was less positive for bulls, with Maxar forecasting that in Brazil “additional moisture this week will continue to promote cherry growth and ease drier areas.

 

“Showers building into the southern regions by the start of next week will be favourable as well.”

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