(Agrimoney) – The rally in soybeans went into reverse, and wheat futures suffered a pasting, as market “hysteria” faded, and investors took some comfort in weather updates, while arabica coffee closed down over 4% on technical selling.
Wheat futures for September closed 4.7% to $5.88 ½ a bushel in Chicago.
The slump reversed much of the gains of the last session, when the grain was pulled higher by jumps in corn and soybeans prices, after US Department of Agriculture data dealt a double blow to supply hopes for the row crops – although not for wheat.
However, corn managed to close the day up, thanks to a strong end of the day.
December, the best-traded contract, closed up 0.5% at $4.31 ¾ a bushel in Chicago.
Biofuel drop
Ethanol data from the US energy agency showed production of the corn based biofuel was down 26,000 barrels a day to 968,000 barrels a day compared to last week, but stocks were also down 308,000 barrels to 19.53m barrels from last week.
The USDA’s Beijing bureau increased their estimates for 2015-16 corn production by 2m tonnes to 230m tonnes, with ending stocks at 93m tonnes.
Chinese corn production was seen growing on high government support prices and increased acreages.
Meanwhile November soybeans were 0.9% lower at $10.29 ½ a bushel, as profit-taking set in after the best close in six months in Chicago.
‘Fireworks started early’
The wheat market was “readily relinquishing risk premium after getting caught up in row crop hysteria yesterday, following the bullish [USDA] reports,” said Richard Feltes at RJ O’Brien.
“The July 4 fireworks actually started June 30 and we are still blasting away here on July 1,” said Kansas-based broker Country Futures.
Corn and soybean markets, meanwhile, were undertaking a “back and fill” movement, “on profit-taking, and relief” that the next round of rains heading for the Midwest will strike south of the northern belt, such as Indiana, Illinois and Ohio, where persistent moisture has dented crop condition.
“The heaviest rains over US Independence Day are tracking south of the super-saturated central Midwest areas,” Mr Feltes said, terming the forecast “negative” for prices.
FCStone reassurance
As an extra setback to wheat prices, INTL FCStone was reassuring over the heatwave in France, saying it had come too late to dent yield prospects.
Meanwhile, rains had stabilised the crop in Germany.
These factors countered some of the more negative talk coming from Canada, where dryness remains a threat to crops, and Russia, where late rains have stalled harvest, and come with the implied risk to quality.
And they encouraged some speculators, who covered a stack of short positions in wheat and headed to the sidelines as the market soared some 18% in four sessions, to use the higher price as an opportunity to take out fresh short positions.
‘Every number bearish’
At Country Futures, Darrell Holaday said that “every number” for wheat in Tuesday’s USDA stocks and acreages reports “was bearish, meaning the grain’s rally in the last session “could not be justified and needed to be sold”.
The USDA estimated domestic wheat stocks as of June 1 at 753m bushels, 35m bushels above trade expectations, while sowings were estimated at 56.08m acres, 212,000 acres above the market forecast.
“The problem with the wheat market is really simple,” Mr Holaday said.
Factoring in Tuesday’s data, “it is not hard to believe that US wheat ending stocks next May 31 [the close of 2015-16] will push 1bn bushels”.
Technical selling
Among soft commodities, New York arabica coffee futures on ICE tumbled on Wednesday, driven by some early weakness in the Brazilian real, which reversed later in the day, but not before it had triggered technical selling in softs.
The came despite Brazilian trade date which reported June exports of 2.39m 60-kg bags, compared to 2.63m bags in May and 2.62m bags this time a year ago.
September arabica coffee futures settled down 4.1% at 127.00 cents a pound, also offered little help by a report from farm officials in the Brazilian state of Parana that, with 38% of the crop harvested, 92% was rated in “excellent” condition, and the rest rated medium.
The Parana farm office, Dera, also pegged the state’s harvest at 1.20m bags, a little above the 1.15m bags expected by Conab, the official Brazilian crop agency.
In London, September robusta coffee futures settled down 0.7% at $1,771 a tonne.
Cotton conundrum
Back in New York, cotton fell back from yesterday’s highs, as markets balanced increased Chinese supply with Tuesday’s bullish USDA stocks and acreages data.
Meanwhile, the International Cotton Advisory Committee raised its forecasts of world cotton ending stocks for 2015-16 to 20.90m tonnes, from a forecast of 20.79m tonnes last year.
December New York cotton closed down 0.6% at 67.54 cents a pound.
Middle Eastern demand
Raw sugar futures held steady, settling at 12.44 cents a pound.
Jack Scoville of Price Futures noted a fairly balanced market.
“Brazil is at harvest and sugarcane production there has been a little bigger than last year, but the selling pressure has been less on reports of better Middle Eastern demand,” he said.
Cocoa managed to edge up again, though it remains short of Monday’s high.
June exports from the Indonesian state of Sulawesi were reported at 4,980.51 tonnes, from 4,656.13 tonnes last year.
However, in the main producing region, West Africa, where the bulk of the main crop is now complete, Mr Scoville said “producers in the region are sold out or hedged, so there is little selling pressure coming from these origins to help cap the rally”.
