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Evening markets: Egypt tender details send wheat prices higher

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Are Egyptian grain officials kicking themselves?

 

Agritel had braced investors for a strongly-contested Gasc wheat tender, as announced overnight, flagging the prospect of “numerous” Black Sea offers, and saying that “competition will remain tough on this destination”.

 

In the end, total offers to the Egyptian grain authority’s tender, at 11 cargos, were not that abundant, down two from those presented to the previous event, last week.

 

While Ukraine and, mainly Russia, did take most of the 405,000 tonnes of wheat that Gasc ended up ordering, one 60,000-tonne cargo did go to France.

 

Highest price in 2019-20

Critically, the price breakdown of cargos offered showed a sharp increase in prices, to an average of $213.19 a tonne paid excluding freight ($230.56 a tonne including it).

 

That was the highest ex-freight price Gasc has paid in six months, and was up more than $8 a tonne on that it sealed at last week’s tender.

 

It was even further above the offers that Gasc received two weeks ago, when it dismissed all but one tender, of French wheat.

 

It paid $199.10 a tonne excluding freight for that cargo – more than $10 a tonne less than it paid for that origin on Wednesday.

 

Prices gain

While the result of the tender was not actually announced until after the close of Paris markets, the offer price breakdown released earlier - showing French origin the cheapest excluding freight (although with Ukraine in close company) - helped Matif December soft milling wheat futures end up 1.0% at E180.00 a tonne.

 

That took the lot back above its 200-day moving average, and indeed tied as the second-highest close for a Paris spot contract since June.

 

And that in turn offered support to US contracts, with Chicago soft red winter wheat for December, the speculator’s favourite, ending up 1.4% at $5.13 ¾ a bushel, a three-month closing high for a spot contract.

 

‘Done for’

Minneapolis spring wheat for December was pulled up from early losses to close up 0.9% at $5.50 ½ a bushel.

 

Data overnight showed the US spring wheat harvest still not complete, as it usually is, with 6% left to reap as of Sunday, making it by far the slowest harvest on data going back to 1995, running for instance about one month behind last year’s pace.

 

“Most of the wheat left out is done for,” Bryant Sanderson at CHS Hedging, although added that “the market has known that for a while now”.

 

‘Not received well’

In fact, US weather is broadly on an improving trend, in time at least to help the delayed harvests of corn and soybeans, prices of which failed to find wheat’s strength.

 

Chicago corn futures for December dropped 0.4% to $3.91 ¾ a bushel, little helped either by comments overnight from the US Department of Agriculture that US exports had started 2019-20 at their slowest in about 45 years.

 

CHS Hedging also noted some disappointment over the Trump administration’s latest attempt to soup up US biofuel use.

 

“It was not received well by the corn industry, saying it isn’t enough demand, and the oil industry, with them not wanting the biofuel usage to increase.”

 

‘Particularly fortuitous’

Soybean futures for November fell by 0.6% to $9.28 ½ a bushel, feeling pressure from the improved US weather too, as well as USDA data overnight showing an unexpected improvement in the US crop rating for the oilseed.

 

“How it gets better when it should be in the bin is a quandary,” said Benson Quinn Commodities, although the USDA did highlight separately that the crop had been helped by “particularly fortuitous” conditions last month.

 

“Above-average September temperatures have enabled full development of late-sown crops.”

 

US-China…

There was of course plenty of talk over US-China relations too, and the potential for a trade deal, and large Chinese purchases of US ags.

 

“The topic trade keeps going back to is the ongoing debate between the US and China on trade,” said Karl Setzer at Agrivisor.

 

“Both sides continue to talk which is a good sign, but there appear to be two main topics of interest. These are what will be done with current tariffs, and intellectual properties.”

 

He added that “there is also some question on if the United States can supply the volume of commodities it has promised”.

 

Four-month high

Whatever, the issue was not backward enough to prevent a large rise in cotton, a big US export to China in usual times, which for December ended up 1.6% at 64.54 cents a pound in New York.

 

That was the best close for a spot contract in nigh on four months.

 

Short-covering ahead of what could be a US-China trade deal is viewed as a bit of an ongoing theme offering price support.

 

‘Deteriorating crop conditions’

Jack Scoville at Price Futures said too that “the market is still finding support from deteriorating US crop conditions”, after overnight USDA data showed a 1 point decline to 38% in the proportion rated good or excellent.

 

The USDA data “still show a tale of two crops with some crops very good to excellent but some crops very poor.

 

“This trend has been a feature of the market all year as the Texas Panhandle and nearby areas have been very hot and dry for a big part of the growing season.”

 

The proportion of the crop in Texas - which is responsible for half of US output - rated good or excellent fell by 4 points week on week to just 26%.

 

Meanwhile, USDA staff in New Delhi issued a relatively downbeat estimate for the 2019-20 Indian cotton crop.

 

‘Now anticipate a big crop’

However, coffee futures fared less well, with New York arabica for December ending down 1.1% at 93.55 cents a pound, within an ace of a contract closing low.

 

London robusta coffee for January ended down 1.9% at $1,240 a tonne, which was a contract closing low.

 

In Vietnam, the top robusta-growing country, “crops are thought to be big despite some uneven growing conditions this year”, Mr Scoville said, noting too growing confidence too of a decent 2020 harvest in Brazil, the biggest arabica (and all-coffee) producer.

 

“Arabica growing areas got needed rains to start the flowering last week and reports indicate that flowering is off to a very good start,” he said.

 

“Many now anticipate a big crop from Brazil next year.”

 

‘Bearish influence’

I&M Smith added that “the prospects of a large crop in Brazil next year remain a bearish influence on the markets, with reports suggesting that the downside is limited to below 90 cents a pound, which is near the cost of production even in low cost producers such as Brazil”.

 

An an extra weight, data overnight showed US port warehouse stocks of green coffee up 1.8% month on month in September, to 7.35m bags.

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