It was a poor day to be an agricultural commodity bull.
The Bcom ag index stood down 1.1% in late deals, looking headed for its lowest close in a month.
The decline reflected dips in a range of commodities, many decline, but not all, linked to a turn worse in sentiment on China-US talks.
Arabica coffee futures for December tumbled by 3.2% to 106.00 cents a pound for their own reasons, amid profit-taking encouraged by Commodity Futures Trading Commission data showing hedge funds having slashed 17,700 lots from their bet short in New York futures and options in the bean.
The was the largest short-covering spree in five months, but signals that with funds having already closed so many bearish bets, substantial upward pressure on prices from the position has already been absorbed.
Cooperative Coocafé was also little help to bulls in foreseeing upbeat prospects for 2020 Brazilian coffee output, citing a benign long-term weather outlook as well as it being an “on” year in the country’s cycle of alternate higher and lower crops.
‘Far from bullish’
Still, for many ags, it was the dampened prospects for an imminent China-US trade deal which did the damage.
“President Trump said no agreement has been reached yet with China and that he won’t eliminate all tariffs,” Benson Quinn Commodities noted.
Cotton, an ag particularly exposed to US-China trade, closed down 0.7% at 66.08 cents a pound for the New York March contract, now the best traded.
Louis Rose at Rose Commodity Group also noted that while the US Department of Agriculture did in Friday’s Wasde briefing cut forecasts for US and world cotton stocks at the close of 2019-20 “overall, despite larger than expected debits to world and domestic carryout, ending stocks of 6.1m and nearly 81m bales are far from bullish”.
In Chicago, soybeans, another big US export to China in normal times, sank by 1.5% to $9.17 a bushel for January delivery, closing back below their 200-day moving average for the first time since September.
An extra setback too was the surprise upgrade in the Wasde to the forecast for US soybean stocks at the close of 2019-20, with the harvest not being downgraded as investors had expected.
“The number that is receiving the most attention is the 15m-bushel increase to soybean reserves,” said Karl Setzer at Agrivisor.
“This put ending stocks at a comfortable 475m bushels, 30m more than the average trade guess.”
And that wasn’t all, with Richard Feltes at RJ O’Brien talking of a “perfect storm” for soybean futures.
This was stoked by “more follow through from the negative November [Wasde] crop report, favorable South American weather and two steps backwards on the US-Chine trade deal.
“The managed fund soy longs look vulnerable,” although it was already reduced in the week to last Tuesday by nearly 14,000 contracts, to 58,429 lots, the late-Friday CFTC briefing showed.
Even soyoil succumbed in the end, closing down 0.3% at 31.42 cents a pound for December delivery, despite the 2% jump overnight by rival palm oil on data showing a surprise fall in Malaysian inventories of the vegetable oil.
‘Stocks remain abundant’
Chicago corn futures for December, meanwhile, ended down 1.1% at $3.73 ¼ a bushel, a two-month closing low.
While the USDA did in the Wasde cut its forecast for the US corn yield this year by more than investors had expected, less bullishly, it left its harvested acreage estimate unchanged and cut expectations for exports and domestic feed and ethanol use.
“US stocks remain abundant and South Korea continues to pass over US corn for imports through the first quarter of 2020,” said Terry Reilly at Futures International.
Chicago wheat futures fell too, by 0.7% to $5.05 ¾ a bushel for December delivery.
“The wheat market has few friends with USDA keeping US carryout over 1.0bn bushels while world stocks remain record large,” said Benson Quinn Commodities.
“Weaker offers from world wheat exporters also weighs.”