PM markets: coffee, soy, sugar cash in on commodities rally

June 29th, 2016


Category: Grains, Oilseeds, Sugar

sugarharvest450x299(Agrimoney) – What do you get if you mix arabica coffee, cotton, soybeans andsugar?

For futures investors, rather than a nasty taste in the mouth, that was a recipe for strong gains on Tuesday.

It was a broadly easier day for risk assets anyway, as tensions eased somewhat over the UK’s exit from the European Union, with sharesrising (closing up 2.6% in London itself) and commodities broadly higher.

The CRB index jumped 2.1% to rise back above its 10-day and 20-day moving averages.

Currency factor

But it was no coincidence that coffee, soybeans and sugar, and less so cotton, were among the best-performing ags – linked by their status as commodities in which Brazil is a major player.

That means their prices are influenced by moves in the Brazilian real(with a stronger real boosting their value, in dollar terms).

And the Brazilian real jumped nearly 3% to reached an 11-month high against the dollar, of R$3.30 to $1, helped by a tough stance by Brazil’s central bank, which said it had no plans to cut interest rates, viewing inflation as likely to stay, a little, above the 4.5% target.

Sweet on sugar, and coffee

Raw sugar made the most of real support, on historical measures, in gaining 1.5% for October delivery to 19.94 cents a pound – the best finish for a nearest-but-one contract since October 2010.

The contract has now gained 3.9% since the UK shocked the world last week by voting to leave the European Union.

But it was arabica coffee which posted the biggest gain on the day, soaring 3.3% to end at $140.60 cents a pound for September delivery, and like the CRB returning above 10-day and 20-day moving averages.

While Commerzbank was somewhat downbeat on arabica price prospects, the bean got an extra boost on the day from lingering concerns over the quality of the Brazilian crop, being reaped in a harvest co-operative giant Cooxupe said was 25.7% through for its own growers.

In London, robusta beans (on which Commerzbank was more bullish) managed decent headway too, adding 2.2% to $1,701 a tonne for September.

Cotton soars

Staying among soft commodities, cotton for December jumped 2.3% to 65.86 cents a pound, helped by a bravura performance overnight by futures on China’s Zhengzhou exchange where the best-traded January contract soared 4.5% to a contract high close of 14,605 renminbi per tonne.

The gain on the Zhengzhou followed a successful auction of cotton from Chinese state stocks, with buyers taking all 21,700 tonnes of the fibre offered up for sale.

While the average price, at 12,868 renminbi per tonne, was below the futures value, there are some questions over the quality of cotton from the state auctions, which have shifted more than 1m tonnes of the fibre.

Prices of cotton, as an industrial commodity, also tend to move more in line with broader economic sentiment than other ags.

Jumping beans

Moving onto Chicago, it was soybeans which were the top performer among the top three contracts, gaining 1.3% to $11.20 ¼ a bushel for November delivery to close, just, back above the 10-day and 20-day moving average.

(Actually, soymeal fared a little better in adding 1.9% to $388.90 a short ton.)

Besides the pull from the real, and soymeal, soybeans found continued support from ideas that Thursday’s key US Department of Agriculture reports could, in relatively low inventories, offset the boost to supply ideas from an expected upgrade to the 2016 sowings estimate.

Ideas that the stocks figure, as of June 1, will come in at 829m bushels implies a carryout [from 2015-16, ie at the end of August] somewhere near 270m bushels”, said Benson Quinn Commodities.

That would represent a far tighter scenario than currency expected by the USDA, foresees domestic soybean stocks ending this season at 370m bushels.

“If 2015-16 stocks do decline as sharp as implied, it will take a very large planted acreage estimate to be bearish the soybean market,” Benson Quinn Commodities added.

Add New Comment

Forgot password? or Register

You are commenting as a guest.