The dollar, a foe to agricultural commodity bulls last month, turned friend.
The greenback, in a dip attributed to profit taking, tumbled by 0.8% against a basket of currencies, to take to 1.0% its decline already for April.
That made dollar-denominated assets that much more affordable to buyers in other currencies, a dynamic which offered a decent tailwind to many ag contracts.
‘Bullish supply outlook’
Arabica coffee was one lot which made the most of it, rebounding by 3.9% to 126.85 cents a pound for May in New York. This after too finding recent support at its 200-day moving average, at 120.77 cents a pound.
“While coffee has been pressured by near-term demand concerns since the end of February, the market is showing early signs that a near-term low may be in,” said ADM Investor Services earlier.
“With a bullish supply outlook providing underlying support, coffee can continue to hold its ground above its 200-day moving average.”
As for the “bullish supply outlook”, as ADM said, “Brazil’s upcoming 2021-22 ‘off-year’ [harvest] is widely expected to have a sharp decline from this season.
“Brazil’s largest co-op Cooxupe has forecast their growers will see their coffee production decline 32% from this season due to dry weather and very warm temperatures.”
But more than that, Volcafe has forward that world coffee output will fall short of demand by a record 11.6m bags in 2021-22, as starts in October, thanks in part to the Brazil production downturn, but also some recovery in consumption as pandemic effects retreat.
“Cautious optimism returns to the coffee market as Covid-19 vaccination programmes advance across more than 170 countries, facilitating the easing of social restrictions and a gradual return to out-of-home coffee demand in cafes, workplaces, and restaurants,” Volcafe said.
Robusta coffee, favoured in at-home brews, for May added a more modest 0.7% to $1,334 a tonne in London.
Centre South output
Raw sugar was also supported by the weaker dollar (and stronger Brazilian real, up 1.2% against the greenback), closing up 2.2% at 15.16 cents a pound for May, back above its 100-day moving average, besides the psychologically important 15.00 cents-a-pound mark.
Firmness in Brent crude helped, in backing ideas that ethanol parity may improve, after a “collapse” in prices of the biofuel which sent the rate which mills are offered for making ethanol rather than sugar, in sugar terms, “from above 15 cents a pound to nearly 12”, according to Marex.
Archer Consulting forecast 2021-22 sugar output in Brazil’s Centre South at 35.05m tonnes, down 3.25m tonnes year on year and below most other estimates.
The forecast of a 574m-tonne Centre South cane crush was definitely bottom of the range.
Also in New York, cotton futures for May put in a decent performance, rebounding by 1.7% to 79.22 cents a pound, although well off an earlier high of 80.88 cents a pound, close to its 100-day moving average, which the contract thought better than taking a crack at.
ADM Investor Services, which acknowledging that the market had been “spooked” by disappointing weekly US export sales data released on Thursday, added that “it is important to keep in mind that two weeks before cotton export sales were the highest for the marketing year.
“Cumulative sales for 2020-21 have reached 14.577m bales, down from 15.0145m last year at this time but the second highest since 2010-11. The five-year average is 12.345m.
Furthermore, “cumulative sales have reached 102% of the USDA’s forecast for the marketing year versus a five-year average of 93%”.
And there was that talk of strong US export sales which. while preceding the weak statistics released last Thursday, could yet prove realised by the next weekly briefing, this Thursday.
In Chicago, gains were not so universal, with wheat, for instance, shedding 0.4% to $6.15 ½ a bushel for May, despite signs of demand.
As Terry Reilly at Futures International noted, “Thailand, Taiwan, and Ethiopia are in for wheat. Algeria seeks wheat on Wednesday”, while Egypt’s Gasc bought 345,000 tonnes of the grain, albeit of Russian/Ukrainian origin, rather than US.
Kansas City hard red winter wheat dragged on the complex, shedding 1.3% to $5.55 ½ a bushel for May after USDA data overnight underlined improvements in US hard red winter wheat condition over the winter.
In fact, wheat crop “conditions around the world are generally favourable”, CHS Hedging said.
‘The trouble is…’
However, corn futures for May managed a 0.3% gain to $5.54 ¾ a bushel for their first winning session of April, helped by ideas that the USDA will, in Friday’s Wasde briefing, cut its forecast for US stocks of the grain at the close of 2020-21.
This after the inventory report last week found less corn in the US than had been expected.
“The trade anticipates the pending Wasde report to be supportive the old crop corn and soybean contracts.,” said Benson Quinn Commodities, noting ideas that for both crops ideas of tighter supplies are based on “better domestic usage and higher export estimates.
“The trouble in corn is that most of the trade believes the final ending stocks number is sub-1.2bn bushels” compared with the 1.50bn bushels the last Wasde estimated, but the USDA on Friday may only undertake “a 100m-bushel decline in ending stocks at this point,” the broker said.
“Corn ending stocks near 1.4bn bushels probably wouldn’t inspire the speculators.”
Soybean futures for May closed up 0.4% at $14.18 ¾ a bushel, also finding some pre-Wasde support, and propped by a 2.1% jump to 53.92 cents a pound in May soyoil.
Besides strength in Brent crude, and Kuala Lumpur palm oil, soyoil was also helped by ideas that weather may pitch another threat to the soybean crop in Argentina, the top exporter of the vegetable oil.
“Widespread rains later this week will slow… dry down” of the crop ahead of harvesting, Maxar said.
This after dryness has already taken a toll on Argentina’s soybean crop.