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Evening markets: Wheat stays in vogue. Coffee returns to favour

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Wheat retained its appeal to end the week. And coffee gained some.

 

In Chicago especially, for soft red winter wheat, which for December ended up 1.0% at $5.32 ¼ a bushel, a fresh three-month closing high.

 

As Mike Mawdsley at First Choice Commodities said, “it is always interesting to see if and when there is friendly news, speculators and traders always buy Chicago”, rather than the other wheat markets.

 

‘Back to harvesting’

In fact, Kansas City hard red winter wheat for December managed only a 0.6% gain to $4.33 ¾ a bushel, allowing its discount to its Chicago peer to reach a historically huge $0.99 ½ a bushel at one point.

 

(Indeed, typically hard wheat, with greater protein content, enjoys the premium.)

 

Minneapolis hard red spring wheat, meanwhile, dropped 1.4% to $5.44 ½ a bushel for December, sending its premium versus Chicago to a contract closing low. (Hard red spring wheat has higher protein still.)

 

On the negative side for spring wheat, “portions of Canada are back to harvesting”, after snow-related delays, Benson Quinn Commodities said, although adding that “obviously, wheat quality remains a big concern”.

 

Canola, another big Canadian crop for which harvesting fortunes are seen recovering, also fell, by 0.8% to Can$453.70 a tonne in Winnipeg for November, now back below its 100-day moving average.

 

Dollar down

Still, back to wheat, and Chicago made the most of its status as the best-traded contract and the world benchmark, with technical reasons one reason for its current appeal.

 

Its latest gain completed a seventh successive week of gains for the December contract, speaking of appeal to momentum investors.

 

And there was more fuss over the National Australia Bank downgrade to its forecast for the Australian wheat crop to a 12-year low of 15.5m tonnes, as reported by Agrimoney on Thursday.

 

Furthermore, there are hopes for US exports, with the dollar easing 0.3% against a basket of currencies, on course for what looks like being its weakest close since July.

 

Export hopes

This at a time when there are plenty of import buyers in the market, notably Saudi Arabia, but also the likes of Jordan, Syria and Turkey, even after the gain prices revealed at the Egyptian tender earlier this week.

 

CHS Hedging talked of wheat futures “finding support from global demand picking up at higher prices”.

 

US wheat export sales data for last week weren’t great, at 395,100 tonnes, down 24% week on week.

 

Still, they were at least within the range of market expectations of 250,000-550,000 tonnes, with the week on week decline in fact down to durum and white wheat.

 

Spring wheat and hard red winter wheat export sales were in fact at five-week highs, with those for soft red winter wheat at least improved.

 

‘Solid sales’

Export sales data for soybeans were termed “solid” by Benson Quinn Commodities, at 1.60m tonnes at the top end of market expectations, and including 850,500 tonnes in orders from China.

 

Furthermore, while conditions for Brazilian sowings have improved – farmers have caught up on early dryness related delays to get 22.8% of crop seeded as of Friday, bank in line with the five-year average, ARC Mercosul said – weather remains a worry for US yields.

 

“Traders eyed possible reductions in the late US crop,” said Terry Reilly at Futures International, seeing support too to values from ideas of “more potential purchases by China as part of a mini trade deal” with the US.

 

Still, CHS Hedging noted that “US sales to China this week have slowed as Brazilian prices have weakened and reportedly have gotten Chinese business”.

 

Soybean futures for November closed up 0.2% at $9.34 a bushel.

 

‘Demand is suffering’

It was corn futures which fared worst of Chicago’s big three, falling by 1.1% to $3.91 a bushel, little helped by poor US export sales data of 368,600 tonnes.

 

“Demand for corn is suffering,” CHS Hedging said.

 

By contrast, New York cotton futures for December edged 0.3% higher to 65.16 cents a pound, helped by US export sales data of 206,500 running bales for upland, the highest in two months.

 

“Sales were again ahead of the average weekly pace required” to meet the USDA’s forecast of US all-cotton exports of 16.5m bales in 2019-20, said Louis Rose at Rose Commodity Group.

 

“We think that the latest figures are neutral but should help December to continue to defend the 60.00 cents-a-pound level.”

 

Hot coffee

Also in New York, arabica coffee for December soared, or rather rebounded, 3.0% to 95.70 cents a pound.

 

The Brazilian real helped, by soaring 1.2% against the dollar, after central bank president Roberto Campos Neto said that the recent weakness in the currency has not spurred inflation – seen in Brazil’s case as a currency positive in allowing rate cuts and economic support.

 

A stronger real boosts the value in dollar terms of assets in which Brazil is a key player.

 

‘No more supplies’

Sentiment was also helped by talk of a supply squeeze in Brazil.

 

“In the physical market, there’s no more supplies and demand has been strong,” Lucio Dias, commercial director at Minas Gerais-based cooperative Cooxupe, told Bloomberg.

 

“We don’t know where the world will get coffee in the next six months.”

 

There have been some ideas hanging around for a while that the weaker 2019 harvest (an “off” year in Brazil’s biennial cycle) could mean a fall-off in supplies, while other observers have talked of weak prices discouraging farmer sales.

 

London robsuta coffee for January closed up 2.0% at $1,251 a tonne.

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