Sugar drops again but corn shows resilience

(Agrimoney) – Many agricultural commodities found headway hard on Monday despite the upbeat sentiment in many other markets.

Shares set fresh five-year peaks in Europe and Tokyo, and touched a fresh record high on New York before suffering a touch of vertigo.

And commodities overall posted gains, helped by a weaker dollar, which fell 0.5%, so making dollar-denominated assets including many raw materials more affordable on export markets.

The CRB commodities index added 0.4%.

‘Significant headwind’

However, New York raw sugar, for once, found headway difficult, depressed by continuing expectations of a record large cane crop in Brazil’s key Centre South district, which offset support from China’s announcement of the purchase of a further 300,000 tonnes of the sweetener for state reserves.

“Good Brazilian Centre South crushing conditions have raised expectations for abundant global supplies,” said Luke Mathews at Commonwealth Bank of Australia.

“This should continue to act as a significant headwind to global sugar prices.”

While Deutsche Bank flagged expectations of Centre South mill closures ahead, thanks to the sugar sector’s poor financial conditions, it also highlighted the unused capacity at other sites.

Raw sugar for July ended down 0.5% at 16.81 cents a pound, the lowest close for a spot contract since July 2010.

Coffee drops

New York arabica coffee for July dropped 1.3% to 135.15 cents a pound, also approaching lowest-since-2010, and also pressed by ideas of a strong Brazilian harvest ahead, at a time when producers still have sizeable stocks left over from their last crop to sell.

Furthermore, bearish investors were cheered by the extent to which speculators have closed short positions in arabica coffee futures and options, to a net short of 172 lots, the lowest since July last year, regulatory data showed.

That leaves plenty of scope for putting in fresh short positions, with one main risk that of a frost scare in Brazil, an outcome which has disappeared off the radar for now.

‘Significant rains’

In Chicago, oatswere a notable loser, tumbling 3.3% to $3.26 ¼ a bushel for July delivery, and a concern in that, while a minor grain on most measures, it is considered a leading indicator for prices.

Still, it is cornthat remains the main focus, and the prospect of data later on Monday showing a huge catch-up in plantings by US farmers after a record-delayed start to the spring sowing season.

Conditions are not perfect, in terms of dryness to allow farmers to get their last crops in, with rains extending into the Midwest for now.

“Significant rains are going to move into the heart of the Midwest Tuesday and Wednesday and leave the upper Plains,” WxRiskcom said.

Still, at Country Futures, Darrell Holaday’s interpretation was that the “western areas of the Corn Belt will open up again at midweek and will have a three-day window of planting before a new system arrives Friday night and into Saturday.

“The east areas should be done with corn and have a very good start on soybean planting.”

‘Excellent stands’

Indeed, one increasing factor to build in to the weather outlook is that rains are blessing crops already in the ground, even if a curse for farmers behind, with some northern Illinois crops, for instance, reported as being in top condition, and central Illinois viewed benefiting from rains after a dry spell.

“Corn that has emerged has excellent stands,” Richard Feltes at RJ O’Brien said.

On a more indisputably supportive front for prices, the US Department of Agriculture announced the sale of 120,000 tonnes of new crop corn to an “unknown” buyer, which many traders took to be China.

‘New selling’

That helped new crop corn for December, at least, hold firm adding 0.1% to $5.20 ¼ a bushel, its first positive close in five sessions, although whether it can hold that level if the USDA crop progress data show a huge rise in plantings…

Some are talking of potentially a record being set for the week, in terms of the proportion of plantings completed – with data tonight showing a leap in completions to 70% from 28% a week ago.

Old crop corn, however, had less luck, ending down 0.5% at $6.49 ½ a bushel, on what was viewed as a decline inspired largely by profit-taking, and the unwinding of spreads, besides a willingness to take short positions per se.

“Corn open interest on Friday was up 4,980 contracts on corn and up 2,420 contracts on soybeans. This indicates new selling in the market,”US Commodities said.

Big planting of soybeans too?

However, for soybeans, it was the November contract which suffered, as so often moving in the opposite direction to corn, with slow plantings of corn seen boosting the temptation for farmer to switch acres to the oilseed, which can be later seeded.

Furthermore, there are some big numbers emerging for corn seedings as well last week.

“Soybean planting is expected to increase from last week at 6% up to 30-35% this week,” Paul Georgy, president of broker Allendale, said.

November soybeans eased 0.3% to $12.25 a bushel, while the old crop July lot, blessed by positive charts as well as a tighter aspect than new crop, added 1.1% to $14.64 ½ a bushel.

It also received a tug from the relentless demand for soymeal, which drove Chicago’s July contract up 2.4% to $435.30 a short ton –its best finish since September.

Dry US Suuth

Wheat couldn’t quite match that pace in Chicago.

But it did manage gains nonetheless, helped in part by solid US weekly exports, as measured by cargo inspections, of 21.1m bushels, down from the 24.0m bushels a week before, but respectable nonetheless.

Country Futures’ Darrell Holaday also flagged the lingering dryness in the southern Plains.

“It is worth noting on the precipitation map is the lack of rain in the south-west hard red winter wheat area,” he said.

Certainly, Kansas hard red winter wheat for July ended up 1.1% at $7.45 ½ a bushel.

Black Sea rains

That was a sharp contrast to prices in Europe, which closed at multi-month lows, depressed by the unearthing of fresh supplies as farmers prepare for harvest, and by improved conditions in the former Soviet Union.

“Rainfall has fallen in the Black Sea region as expected and that has pressured wheat,” Mr Holaday said.