(Agrimoney) – What goes up must come down.
Agricultural commodity bears, who took a break in the last session, were back in force in this one.
Coffee tanked, cocoa retreated from a three-year high, grains slumped back from early highs. While Apple shares’ fall was related to different factors, poor reviews for the latest iPhone, it seemed only fitting that a company named after a fruit might hurt too.
Ag futures had earlier appeared early on up to the task of dealing with a resurgent dollar – which set a fresh four-year high against a basket of currencies, boosted by the monetary policy divergence between that being followed by the US and that in less upbeat major economies.
But export data questioned whether in fact the US was up to the task at current price levels.
‘A little disappointing’
Sure, soybean export sales of 2.57m tonnes might sound huge, but that did include a big ceremonial order to China which had been pre announced.
The 300,000 tonnes, or so, sold to other countries than China “might have been a little disappointing” to investors, said Darrell Holaday at Country Futures.
Corn sales, at 836,400 tonnes were seen as fine, but wheat’s, at 396,000 tonnes, were below most expectations, taking the edge off a separate announcement by US Department of Agriculture (USDA), through its daily alerts system, of export sales of 120,000 tonnes of hard red winter wheat to Nigeria.
In fact, that Nigeria order had been rumoured in the market in the last session, albeit with talk more of one cargo than two.
‘Poor price competitiveness’
The International Grains Council, lifting further its estimate for world wheat and overall grains production in 2014-15, highlighted that the stronger dollar had been “seen as negatively affecting US export prospects.
“Traders in the US continued to be concerned about slow exports, with a strong local currency seen exacerbating poor price competitiveness.”
The IGC cut its forecast for US wheat exports by 300,000 tonnes to 24.1m tonnes, and a 23% slide year on year.
While there remain signs of demand around, with Qatar buying 40,000 tonnes of (probably Russian) wheat, South Korea purchasing 23,600 tonnes from the US, and some tenders out there from Ethiopia, Morocco and UAE, futures ended down 1.3% at $4.74 a bushel in Chicago for December delivery.
Quality support
That said, it was notable that hard red winter wheat did better, closing down just 0.25 cents at $5.64 ¼ a bushel in Kansas City for December delivery.
Besides being the type Nigeria bought, the variety emerged relatively well out of the weekly export sales report, with volumes of 146.2m tonnes.
Furthermore, there is talk of Brazil being in the market for imports, rumours which tally with reports of rain in the south of the country, a potential negative for crop quality.
In Paris, (so-called) milling wheat for November closed down 1.3% at E150.75 a tonne.
European Union soft wheat exports remained strong, at 613,000 tonnes as measured by licences, taking the total so far this season to 6.4m tonnes, 200,000 tonnes up year on year.
However, the questionable milling status of French supplies was underlined by news of, unusual, imports from Canada, a supplier of hard wheat.
“France imported 22,000 tonnes of Canadian wheat this week, and has already imported 2 smaller cargoes of Canadian wheat this month,” CHS Hedging noted.
Weather has opened up
For corn, even if US exports were decent, prices remain under pressure from the US harvest, from which strong yield reports continue to emerge.
“Weather conditions have opened up across the Corn Belt and the Plains and will stay that way through next Tuesday,” said Darrell Holaday at Country Futures, underling the weight of harvest pressure on prices.
“Keep in mind that eastern Missouri, Illinois, and Indiana have been able to cut most of the week and they will stay open through next Thursday night.
“This will allow or the largest amount of harvest activity that has been seen this crop year in the US.”
A 1.1m-tonne downgrade by UkrAgroConsult to its estimate for Ukraine’s corn crop was small beer in comparison, and December corn ended down 1.1% at $3.26 a bushel in Chicago, although failed narrowly to set a fresh four-year closing low.
‘Wish on their tombstones’
Soybeans did set a four-year closing low, in ending down 1.5% at $9.22 ¾ a bushel for November delivery.
Again, harvest pressure was viewed as a big component in the retreat, along with strong expectations for South American sowings of the oilseed, given slightly better profitability prospects there than for corn.
Indeed, Brazil’s government unveiled a rare corn stockpiling scheme, in what was viewed as an effort to support prices of the grain.
Still, even on soybeans, it is worth repeating comments from Kory Melby, the Brazilian ag consultant, who noted local prices as low as $7.00 a bushel, and said that “the one thing I do know with certainty, that if Brazil produces 95m+ tonnes of soybeans this year, they will wish on their tombstones that they never did”.
Cocoa cools
Elsewhere in the oilseeds complex, Paris rapeseed did better, adding 0.7% to E317.00 a tonne for November, finding succour in a falling euro and strong prices of palm oil, which closed up 2.0% at 2,154 ringgit a tonne in Kuala Lumpur.
Rapeseed is a vegetable oil-heavy, rather than meal-heavy, oilseed.
But, turning to soft commodities, the stronger dollar helped beat down New York contracts, with cocoa, for instance, ending down 1.1% at $3,333 a tonne for December delivery.
This after hitting a three-year high of $3,399 a tonne, although the inability to get above $3,400 was viewed as encouraging investors to take profits on the rally of the last two weeks, which has been driven by Ebola concerns.
Ghana, the second-ranked producing country, sloughed off regional Ebola concerns to estimate production at 1m tonnes for 2014-15, up from some 900,000 tonnes in the season about to finish.
Brazilian rains
Arabica coffee slumped 3.6% to 182.30 cents a pound, hurt by technical selling, as well as ideas of rains for Brazil, where precipitation is needed to help boost blossoms, and ensure they hang around to form cherries for the 2015 harvest.
“Somar said that the rains should begin in earnest in the second week of October, and a few showers are possible in southern fringe area this weekend,” Jack Scoville at Price Futures Group said.
“The trees need the rains to start soon to encourage flowering.”
‘Signs of reversal’
Raw sugar at least managed to buck the negative trend, closing up 1.1% at 16.08 cents a pound for March delivery, albeit well below its intraday high of 16.39 cents a pound.
The sweetener has been boosted by downbeat Brazilian production data released on Wednesday, which has supported ideas of a “sudden death” to the Centre South cane harvest.
Sucden Financial added that the sugar market “is showing possible signs of reversal, and so profit-taking indications to the shorts.
“We expect a test of 16.50 cents a pound in the short term and, should we get a close above this level, some further upside momentum.”
