(Agrimoney) – It was a day of profit taking on the grain markets, as corn and wheat futures turned lower.
And soft markets saw a sell-off, as ideas of ample supplies of coffee and sugar from Brazil grew.
“There is not a lot of fresh news in the marketplace,” noted Ami Heesch, at CHS Hedging.
“Grain and soybean weakness is being attributed to technical profit taking rather than the lack of fresh news,” said Kim Rugel, at Benson Quinn Commodities.
Tregg Cronin, at Halo Commodities, noted “back and fill trade,” as the industry chews over last weeks rally.
Oil up, dollar down
Outside markets were, on the face of it, supportive.
Brent crude oil futures were up 3.2% at a fresh five-month high of $47.19 a barrel in afternoon deals.
And the dollar was down for most of the day, although it did briefly spike higher as the markets digested the latest policy statement from the US Federal Reserve.
The statement, released late in the session, gave little clear direction to the markets, leaving the door at least theoretically open for a June rate rise, while doing nothing to increase confidence in such a move.
Bearish soybean outlook
Rabobank issued a bearish outlook for grains, as it maintained its medium term price forecasts, even as it upped its short-term forecasts after the recent rally.
For soybeans, the bank noted that “long-term bearish fundamentals still remain in place and will ultimately push prices lower,” even as it noted “large-scale fund short covering” fuelling last week’s rally.
Chinese demand
But front month soybean futures kept their head above water, as markets still remain wary of any further crop downgrades from Argentina, and with Chinese demand believed to still be heavy.
“Over the last week, there were rumors as many as 50 cargoes of soybeans were bought by China, split amongst Brazil, Argentina and the US,” said Mr Cronin.
“The combination of the buying coming from both Chinese end users as well as managed funds is probably what has kept futures from suffering a more severe downdraft once the physical short was covered,” he added.
The USDA announced a fresh sale of 340,000 tonnes of soybeans for shipment in 2015-16.
July soybeans finished up 0.3% at $10.19 a bushel.
Ideas of drier Corn Belt
“Corn has spent most of the day on the defensive today,” said Darell Holaday, as he noted that the US Corn Belt is expected to turn drier next week, which will allow planting progress to pick up once again.
“The weather models continue to point to rain in the Plains and Corn Belt through early next week,” he said.
“But they also point to a much drier pattern after next Monday. We are also seeing planting progress this week in eastern areas of the Corn Belt this week and they will continue to progress through Friday.
Energy data can’t lift ethanol
US energy data showed weekly ethanol production was down 12,000 barrels to 927,000 barrels per day.
Stocks of the corn-based biofuel were also lower, at 21.6m barrels, down by 417,000 barrels.
But the Argentinian government announced a 2% boost to the minimum amount of ethanol that must be blended into gasoline, to 12%.
Still, ethanol prices were down by 0.6% in afternoon deals, at $1.534 a barrel.
July corn futures finished down 0.6%, at $3.80 ¾ a bushel.
Northern Hemisphere in good condition
“Wheat is weaker again today,” said Mr Holaday.
“The conditions throughout the northern hemisphere are simply overwhelming short covering rallies.”
July Chicago wheat futures finished down 0.7%, at $4.83 ½ a bushel.
Rapid start to Brazil season
Sugar futures slumped, as the cane body Unica announced a record start to the season in Brazil’s Center South Cane belt.
Unica also gave its first estimate of full year sugar output, pegging expectations 33.5-35m tonnes.
July raw sugar settled down 1.3%, at 15.84 cents a pound, after falling 2.4% to 15.66 cents.
August white sugar settled down 0.7%, at $460.80 a tonne.
Brazilian production
Coffee markets were caught up in the soft commodity sell-off as well.
The roasting industry association ABIC forecast Brazilian coffee production in 2016 at 53m bags. The Brazilian coffee season is concentrated in the dry period between July and September.
Since the start of March forecasts for Brazilian production of between 49.7 and 58.1m bags.
July arabica futures settled down 3.4%, at 121.50 cents a pound, the lowest level since April 8.
Export boom
The government of Vietnam, the world’s top robusta exporter, forecast exports in April at 160,000 tonnes.
This would be 55% up year-on-year, and above market expectations of 140,000-150,000 tonnes.
July robusta futures settled down 1.0%, at $1,573 a tonne.
