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Evening markets: Wheat runs out of buyers. Arabica runs out of sellers

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In the end, the first crop trading season of the week was overshadowed by, but not defined by, China-US relations.

 

Sure, the reports that Beijing had instructed state ag buyers Cofco and Sinograin to pause soybean and pork purchases, with some questions over corn and cotton too, provoked selling.

Chicago lean hog futures for July stood down 3.0% at 55.325 cents a pound, with Terry Reilly at Futures Internationalk noting that “there was also talk China may cancel pork purchases”.

 

However, soybean futures for July, while pulled back well below intraday highs by the news, managed to end with a loss of just 0.25 cents to $8.40 ½ a bushel in Chicago for July.

 

And in New York, cotton – like soybeans another ag for which the US is a leading exporter, and China the top importer – for July gained 4.3% to 60.06 cents a pound.

 

The contract ended up nearly 3 cents from its intraday low, reached on the report of Beijing’s import caution.

 

‘Hot and dry weather’

One factor in favour of these ags is that many investors believe that China and the US will not come to fresh blows, after President Donald Trump’s comments late on Friday which were actually viewed as less incendiary than many had expected.

 

“China’s response to [the] US around the Hong Kong issue [will] probably be mild and [the] US-China phase one deal is likely to hold,” Citigroup said.

 

Meanwhile, for cotton there are growing worries over setbacks to the US dryness which is threatening the key Texas crop.

 

“Hot and dry weather is expected across most of the Plains this week,” said Maxar, adding that “dryness will be increasing across the region”.

 

‘Will favour harvesting’

However, such weather was viewed as less of a negative for winter wheat, of which the US harvest has begun, with dryness speeding harvest and helping with the drydown of crop for reaping.

 

The conditions “will favour winter wheat drydown and harvesting in the southern Plains and remaining corn and soybean planting in the northern Plains”, said Maxar.

 

Chicago soft red winter wheat for July shed 1.1% to $5.15 ¼ a bushel, despite too some decent US export data for last week, at 499,353 tonnes, around the middle of the forecast range of 350,000-600,000 tonnes.

 

And this despite a 0.5% dip in the dollar against a basket of currencies, improving the competitiveness of dollar-denominated exports.

 

Against the rouble, the currency of key wheat exporter Russia, the dollar tanked by 1.3%.

 

‘Showers to increase’

“What really seems to be drive wheat back lower this morning just seems to be a lack of news, fresh inputs or willingness to build fresh long positions,” said Benson Quinn Commodities.

 

Paris wheat for September was also little help in dropping by 0.9% to E186.50 a tonne, amid some ideas of rains in dry western parts of Europe.

 

“Showers are expected to increase some across western Europe later this week, easing dryness in southern France and northern Italy,” said Maxar, with some midweek rains, and a turn cooler in temperatures, expected in the UK too.

 

Paris rapeseed, by contrast, added 0.3% to E371.00 a tonne for August, helped by a Strategie Grains downgrade to its 2020 EU crop forecast, and upgrade to import expectations.

 

‘Favourable for early growth’

Back in Chicago, corn ended lower too, by 0.9% to $3.23 ¾ a bushel for July, undermined by the China import report, and by softness in rival grain wheat, and ideas of a hefty US harvest this year.

 

“The mostly warm/dry 10 day Midwest weather is favourable for early corn growth,” said Richard Feltes at RJ O’Brien.

 

But at least US export data for last week were decent, at 1.13m tonnes, towards the top end of market expectations of 800,000-1.20m tonnes.

 

There were also ideas that the extent of selling that funds had undertaken already in corn may limit their appetite for further such trades.

 

Arabica vs robusta

If wheat ran out of buyers, in New York arabica coffee ran out of sellers, helping the July contract close up 2.1% at 98.30 cents a pound - after it hit a fresh seven-month low of 94.80 cents a pound, but couldn’t hold it.

 

Jack Scoville at Price Futures noted that “many smaller roasters are actively trying to unload green coffee already bought a there are only a few outlets for sales at this time.

 

However, this dynamic “should change in the next few weeks as the US and EU economies slowly open up” after coronavirus lockdowns.

 

London robusta coffee for July ended down 0.9% at $1,159 yuan a tonne, reversing some of its recent outperformance against arabica as highlighted by the International Coffee Organization.

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