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Evening markets: Soybeans slip up at $10 - but cocoa futures soar

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Soybean futures after finding the $10-a-bushel mark as slippery as an eel.

 

While some lots have managed to bag it, the contract that really counts, the best-traded November one, has found it elusive.

 

On Monday, the contract touched $10.08 ¾ a bushel, only to close just below the psychologically important mark, while in this session its sally into double figures petered out at $10.05 ¾ a bushel, heralding a retreat.

 

The contract settled at $9.91 ½ a bushel, a drop of 0.8% on the day, for only its second negative close in 16 sessions.

 

Bullish factors

It was not as if the day failed to provide some fodder for soybean bulls, with yet more US export sales of the oilseed to China, of 132,000 tonnes, plus the same amount booked to “unknown”.

 

China’s renminbi hit a 16-month high against the dollar too, boosting the country’s ability to afford imports of assets, such as many ags, denominated in the greenback.

 

Meanwhile, the condition of the US soybean crop as revealed overnight by the US Department of Agriculture showed an unexpected 2-point decline – if to a still-elevated 63% rated “good” or “excellent”.

 

And worries remain about dryness in Brazil, where soybean planting is allowed by the Brazilian government to begin in top growing state Mato Grosso on Wednesday.

 

“But dry weather over the next week should prevent any significant planting progress,” Maxar said, if seeing potential for wet weather in much of the Centre South.

 

‘Room for funds to buy’

Richard Feltes at RJ O’Brien said that, even though managed money has an estimated net long in soybeans of 200,000 contracts already, “there is certainly room for funds to continue extending soybean longs.

 

“The current fund soy long has exceeded 100,000 contracts for only one month - a relatively short duration versus last time funds accumulated large soy long.

 

“Bottom line - suspect managed funds will continue to extend soy long as long as Chinese soy buying continues, uncertainty over the US soy yield persists, and until spring rains across Centre West and North East Brazil relieve the prevailing dry pattern.”

 

Crush data

However, with profits to take, this proved insufficient to keep soybean prices above the $10.00 mark, given a seasonal headwind, with the start of the US harvest bringing extra supplies and allowing extra farmer hedging, besides enabling the removal of the last vestiges of risk premium.

 

Furthermore, late in the session, US crush data for August from industry group Nopa, fell by more than expected, to a nine-month low of 165.055m bushels.

 

Investors had expected a 169.5m-bushel figure, according to a Reuters poll.

 

Not that all the data were poor, with Terry Reilly at Futures International noting that the report showed US soymeal exports last month at “a large 754,600 short tons, second highest for the month of August in history”.

 

Even so, soymeal for December dropped 0.9% to $322 per short ton, signalling a market in which sellers had wrestled back control.

 

Quality worry

That was the case for Chicago corn too, which finished down 0.9% at $3.66 a bushel for December, again despite a large US export sale of the grain announced on the day, of 120,000 tonnes to “unknown”.

 

Mr Reilly noted “light harvesting pressure for corn”.

 

And, sticking with the row crops, New York cotton for December dropped 0.3% to 66.44 cents a pound, suffering its own profit-taking bout, despite a weather threat in the form of Hurricane Sally.

 

“Concern remains over open boll cotton quality in the south eastern states due to the associated heavy rain,” said World Weather.

 

Chicago soft red winter wheat for December, meanwhile, shed 1.4% to $5.38 ¼ a bushel, with selling accelerated by the chart damage caused by a convincing drop below its 200-day moving average.

 

‘Wetter weather’

Among soft commodities, arabica coffee futures for December dropped again, ending down 1.0% at 121.80 cents a pound in New York – to take losses already this week to 8.0%.

 

However, Tuesday’s close was well above an intraday low of 115.00 cents a pound (at which point two-day losses stood at 13.2%), with the contract, having flung itself down the lift shaft, appearing to find the door to the stairs up again.

 

The selling has been attributed to the prospects of rain in Brazil’s coffee belt, where dryness was raising concerns over the setting of blossoms.

 

“Updated forecasts call for wetter weather over Brazil’s major arabica-growing regions starting on Sunday which will go some way to relieving the excessive dry conditions seen during the past few months,” said ADM Investor Services.

 

It noted too that the contract had been “overbought for several weeks”.

 

Fund u-turn?

Commerzbank said that “the fact that rainfall is forecast in key growing regions of Brazil, the largest producer, is allaying concerns about moisture levels during the flowering phase of the 2021-22 crop.

 

“The trees are already beginning to blossom and require moisture so that fruits can develop from the flowers.

 

“Many short-term-oriented market participants are now likely to reduce the long positions they had expanded sharply in recent weeks.”

 

Managed money’s net long in arabica futures and options, at 48,450 contracts, is at its highest in nearly four years, latest US regulatory data show.

 

Hot cocoa

However, raw sugar futures for October soared 2.7% to 12.08 cents a pound, helped by a 2.6% bounce in Brent crude, and boding well for fuel markets (with sugar competing with ethanol for cane in the likes of Brazil’s Centre South).

 

And New York cocoa for December jumped by 5.4% to $2,694 a tonne, amid fresh unrest in top producing country Cote d’Ivoire, where Alassane Ouattara has decided to run for a third term as president, against the constitution.

 

Police fired tear gas at protestors against Mr Ouattara’s decision, raising concerns of strife which could disrupt the country’s cocoa exports.

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