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Evening markets: wheat, corn gain as expiry looms. Coffee futures up too

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Wheat futures found some buyers, at last, although whether they stick around…


In Paris, March soft milling wheat futures bounced 1.4% from their contract closing low to the last session to end this one at E161.50 a tonne, helped by Algeria’s purchase of 570,000 tonnes of the grain – believed largely from France - at prices reported as $208.75-210.50 a tonne on a C&F basis.


OK, “some feel Argentine wheat may also factor into the mix,” broker CHS Hedging said.


And CRM AgriCommodities reminded that “more European Union sales will be required in the weeks ahead in order to catch up with the yearly 20% delays in exports accumulated since the beginning of the marketing season in July”.


But it was a positive nonetheless.


‘Supportive for prices’


And London feed wheat futures for May fared well too in adding 0.4% to £142.25 a tonne, against a pound supported by hopes of progress in Brexit talks, with ideas that agreement may be close on a divorce bill.


CRM AgriCommodities also termed the first UK agriculture ministry estimates for UK cereal supply and demand for 2017-18 as “supportive” for prices, in showing a drop in stocks despite a 2% rise in production this year.


“The balance of availability and consumption could drop 18% at 2.65m tonnes, its lowest since 2013-14,” the analysis group said.


‘Not all that comforting’


Meanwhile, in Chicago, the world bellwether market, soft red winter wheat for March jumped 1.4% to $4.34 ¾ a bushel, taking some strength from European firmness, but with its own reasons for gaining too, after the US Department of Agriculture forecast US sowings next year at the lower on records going back to 1919.


However, there were also ideas of hedge funds taking profits on short bets at prices near contract lows, and with the uncertainty ahead of the delivery process for the expiring December contract, and some ideas that not much wheat will be offered against the lot.


“Given basis strength, and where December 2017 and March 2018 futures are trading relative to full carry, there isn’t expected to many deliveries on first notice day,” on Thursday, said Tregg Cronin at Halo Commodity Company.


“Adding to that sentiment, is the fact 10 registrations were cancelled last night in Conant, Ohio.


“There are only 103 outstanding registrations in soft red winter wheat warehouses, or 515,000 bushels,” a total “not all that comforting for a 500m bushel supply-sized market”.


‘Raised odds for significant deliveries’


Signally, Kansas City hard red winter wheat – a less liquid contract, and less frequented by speculators - for March managed a more modest 0.9% rise to $4.31 ½ a bushel.


This despite worries over dryness in the US Plains, where the wheat class is grown.


Minneapolis hard red spring wheat edged 0.2% higher to $6.23 ½ a bushel – with even these gains looking unlikely until the closing deals.


CHS Hedging flagged talk that “China bought a couple cargoes of Canadian [spring] wheat this week”, underlining a lack of competitiveness in US values.


Halo’s Tregg Cronin said that Minneapolis “price action of late has raised odds for significant deliveries on first notice day when registrations go to the exchange this afternoon”, although the December discount to the March contract has expanded rapidly this week, boosting the incentive to delay selling to 2018.


Ethanol booster


Chicago corn gained too, adding 1.1% to $3.53 ½ a bushel for March delivery, closing right on its 10-day moving average.


Again, closing by speculators of substantial short positions, ahead of first notice day for the December contract (when futures take on obligations over physical crop), was seen as a cause for the rally.


In the previous three sessions, open interest in corn futures overall dropped by more than 100,000 contracts.


But there was also help from US ethanol data too, showing production of the biofuel last week at 1.066m barrels a day – down 8,000 barrels a day from the record high the previous week, but still up 5.3% year on year.


“At the current production rate, annualised corn use would end up around 5.665bn bushels, omitting sorghum use, well above the 5.475bn-bushel USDA estimate” for 2017-18, said Terry Reilly at Futures International.


And, sticking with demand, the USDA unveiled export sale of 101,600 tonnes of corn for 2017-18 delivery to an “unknown” buyer.


‘Drier tone’


The USDA unveiled a sale of US soybeans to China too, to the tune of 263,000 tonnes.


However, the announcement failed to prevent soybeans for March closing down 0.5 cents at $10.04 ½ a bushel in Chicago.


Richard Feltes at RJ O’Brien said that Argentine weather “leans positive” for prices, having a “drier tone”, with Commodity Weather Group trimming to 5%, from, 40%, its forecast for rain coverage over the next five days.


On the negative side for values, the USDA’s area forecasts raised to a record 91.0m acres US soybean sowing expectations for 2018.


Furthermore, soyoil futures for December eased 0.2% to 33.95 cents a pound, amid some nerves ahead of a biofuel report expected on Thursday from the Environmental Protection Agency.


And there is talk too of China buying soybeans from Brazil, at a time of year when the US should hold sway in international markets.


Coffee heats up


Among soft commodities, New York arabica coffee futures for March closed up 2.4% at 132.20 cents a pound – their best finish in seven weeks.


It was also their first finish in two months above their 50-day moving average, with the gains attributed in part to closing of short bets ahead of month end.


Total open interest in New York coffee fell on Tuesday for the 16th straight session, to a two-month low at 195,617 contracts.


Concerns are also growing over exports, with monthly data from the International Coffee Organization expected to show a further decline, as previewed by Agrimoney.


New York vs London


New York cocoa for March soared 2.8% to $2,106 a tonne, also closing above its 50-day moving average for the first time in two months, in a rally attributed largely to the unwinding of spreads with London contacts.


London cocoa for March managed only a modest 0.8% gain to £1,538 a tonne, with strength in sterling able to explain only a small part of that underperformance.

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