20th Sept 2013, by Agrimoney
Commodities struggled on Friday, and not just agricultural ones.
OK, there is some feeling that the Federal Reserve's decision on Wednesday of plans to withdraw its emergency economic support bodes well for commodity prices, agricultural ones included.
But James Bullard, president of the St Louis Fed, dispelled residual euphoria by saying that the Fed's decision had been "borderline", adding that the central bank could begin tapering its monthly $85bn asset purchases from October, if economic data improves.
The CRB commodities index ended down 1.1%, reflecting losses in a range of raw materials. But farm commodities did their bit.
Yield fears wane
Soybeans, which had been the leader in Chicago for much of August and September, continued their march south, as fears for the US yield continued to ease.
In part, this fading is based on weather, and observations of rains which are seen as reviving soybean hopes (if coming too late for corn).
"Rains overnight in Minnesota, Wisconsin, Iowa and Missouri are offering resistance as the yield outlook on beans is seen improving or at the very least has stabilised," Benson Quinn Commodities said.
But there are also decent, if not outstanding reports from the early US harvest.
'Not as low as feared'
"Early indications" are of better than expected soybean yields, Darrell Holaday at Country Futures said, if adding that there is "not enough data to draw conclusions".
Richard Feltes at Chicago-based RJ O'Brien said: "Early soy yields, while not a good as corn, are not as low as feared in late August."
And the very fact that harvest is happening is a negative for prices, in meaning a jump in supplies which anyway tends to weigh on values, and is already evident in cash markets..
Pressure on prices is "stemming from a steady pick-up in harvest activity, ongoing managed fund liquidation and easing quick shipment basis levels", Mr Feltes said.
'Ideal for harvest'
Furthermore, the harvest looks set to accelerate next week, given a better weather outlook for fieldwork.
"Overnight and morning rains have brought harvest to a halt for the moment. Next week's forecast looks ideal for harvest to hit full stride," CHS Hedging said.
Country Futures' Mr Holaday said: "Next week's weather will allow for a harvest push in corn and soybeans and that has led to some harvest hedge pressure."
'Continue to replenish moisture'
Weather appears to be improving, a little, in Brazil too, where dryness has been delaying the onset of soybean sowings.
"Heavy rains are expected across northern Rio Grande do Sul, Santa Catarina, and Parana through Tuesday, with a few showers also expected in Mato Grosso do Sul, Sao Paulo, and southern Minas Gerais," weather service MDA said.
"Showers in Sao Paulo will continue to replenish moisture there ahead of corn and soybean planting," although "more rains will still be needed in far northern areas in the coming weeks".
'Panic technical selling'
And, as an extra negative for soybeans, technicals turned bleak too, with the closure in the last session of the November contract's chart gap dating from August 26, and the weakness in today's session, ringing chart alarm bells.
"When the November soybean contract traded below $13.31 a bushel, panic technical selling surfaced, as funds see this as a sign of a major trend change," Mr Holaday said.
"Technically, this points to a test of the support at $12.85 a bushel on November futures."
Which indicates some downside from where they closed on Friday, down 1.8% at $13.15 ¼ a bushel in Chicago, the contract's lowest finish in nearly a month.
'Anchoring the market'
For corn, many of the same points applied, with a stronger forecast harvest pace speaking of higher supplies and price pressure, and results from what is being combined continuing to reassure buyers.
Indeed, Informa Economics raised its forecast for US production of both crops, as it came in with its first acreage forecasts for 2014.
However, at least soybeans have decent export demand to count on, unlike corn, which remains uncompetitive compared with rival offers from South America and Ukraine.
"The corn premiums in the US remain large versus both Brazil and the Black sea region," US Commodities said.
"Brazil versus the FOB the Gulf is $0.60 a bushel cheaper and the Ukraine is $0.90 a bushel cheaper. It is the cheaper world values that are anchoring the market."
Corn for December dropped 1.9% to $4.51 a bushel, a one-month low.
Corn vs wheat
And that boded ill for wheat too, despite the improved idea over prices as concerns over Argentine and Russian crops, and overall world quality, have grown this month.
"Wheat now has better fundamentals compared with corn, but the wheat-corn spread is nearing a stiff $2 a bushel, wheat over corn," US Commodities noted.
OK, "the Argentine wheat areas have been dry and many feel that the crop has been trimmed to 12m tonnes," Mr Holaday noted.
And Benson Quinn Commodities flagged that, for wheat, "strong weekly US exports sales reported yesterday and developing weather concerns in South America and quality issues in Russia are seen as supportive factors, along with an improved technical structure".
But wheat for December tumbled 1.6% to $6.46 ¼ a bushel, getting back within 5 cents of that $2-a-bushel premium over December corn.
'Bearish on arabica coffee'
Soft commodities eased too, little helped by a return by Brazil's real to the back foot, losing 0.7% against the dollar, and so lowering in dollar terms values of crops in which Brazil is a major player.
These include arabica coffee, which dropped 1.0% to close at 114.65 cents a pound for December delivery, continuing to feel pressure too from ideas of ample supplies.
"We remain bearish on arabica coffee due to expectations of a bumper crop which would provide abundant supplies," Joyce Liu at Phillip Futures said.
Brazil;s Conselho Nacional do Café also noted continued pressure on prices from data showing comfortable stocks of green coffee in the US, and the "expectation of development-friendly rains for Brazilian coffee plantations".
Many of the Brazilian areas for which MDA forecast rain (above), such as Parana and Minas Gerais, are coffee-growing regions.
Rain disruptions
However, such ideas of Brazilian rains were more supportive for raw sugar futures, in speaking of interruptions to cane harvesting, and therefore output of the sweetener.
Raw sugar for October bucked the negative trend, just, by adding 0.01 cent to 17.18 cents a pound.
Commodities struggled on Friday, and not just agricultural ones.
OK, there is some feeling that the Federal Reserve's decision on Wednesday of plans to withdraw its emergency economic support bodes well for commodity prices, agricultural ones included.
But James Bullard, president of the St Louis Fed, dispelled residual euphoria by saying that the Fed's decision had been "borderline", adding that the central bank could begin tapering its monthly $85bn asset purchases from October, if economic data improves.
The CRB commodities index ended down 1.1%, reflecting losses in a range of raw materials. But farm commodities did their bit.
Yield fears wane
Soybeans, which had been the leader in Chicago for much of August and September, continued their march south, as fears for the US yield continued to ease.
In part, this fading is based on weather, and observations of rains which are seen as reviving soybean hopes (if coming too late for corn).
"Rains overnight in Minnesota, Wisconsin, Iowa and Missouri are offering resistance as the yield outlook on beans is seen improving or at the very least has stabilised," Benson Quinn Commodities said.
But there are also decent, if not outstanding reports from the early US harvest.
'Not as low as feared'
"Early indications" are of better than expected soybean yields, Darrell Holaday at Country Futures said, if adding that there is "not enough data to draw conclusions".
Richard Feltes at Chicago-based RJ O'Brien said: "Early soy yields, while not a good as corn, are not as low as feared in late August."
And the very fact that harvest is happening is a negative for prices, in meaning a jump in supplies which anyway tends to weigh on values, and is already evident in cash markets..
Pressure on prices is "stemming from a steady pick-up in harvest activity, ongoing managed fund liquidation and easing quick shipment basis levels", Mr Feltes said.
'Ideal for harvest'
Furthermore, the harvest looks set to accelerate next week, given a better weather outlook for fieldwork.
"Overnight and morning rains have brought harvest to a halt for the moment. Next week's forecast looks ideal for harvest to hit full stride," CHS Hedging said.
Country Futures' Mr Holaday said: "Next week's weather will allow for a harvest push in corn and soybeans and that has led to some harvest hedge pressure."
'Continue to replenish moisture'
Weather appears to be improving, a little, in Brazil too, where dryness has been delaying the onset of soybean sowings.
"Heavy rains are expected across northern Rio Grande do Sul, Santa Catarina, and Parana through Tuesday, with a few showers also expected in Mato Grosso do Sul, Sao Paulo, and southern Minas Gerais," weather service MDA said.
"Showers in Sao Paulo will continue to replenish moisture there ahead of corn and soybean planting," although "more rains will still be needed in far northern areas in the coming weeks".
'Panic technical selling'
And, as an extra negative for soybeans, technicals turned bleak too, with the closure in the last session of the November contract's chart gap dating from August 26, and the weakness in today's session, ringing chart alarm bells.
"When the November soybean contract traded below $13.31 a bushel, panic technical selling surfaced, as funds see this as a sign of a major trend change," Mr Holaday said.
"Technically, this points to a test of the support at $12.85 a bushel on November futures."
Which indicates some downside from where they closed on Friday, down 1.8% at $13.15 ¼ a bushel in Chicago, the contract's lowest finish in nearly a month.
'Anchoring the market'
For corn, many of the same points applied, with a stronger forecast harvest pace speaking of higher supplies and price pressure, and results from what is being combined continuing to reassure buyers.
Indeed, Informa Economics raised its forecast for US production of both crops, as it came in with its first acreage forecasts for 2014.
However, at least soybeans have decent export demand to count on, unlike corn, which remains uncompetitive compared with rival offers from South America and Ukraine.
"The corn premiums in the US remain large versus both Brazil and the Black sea region," US Commodities said.
"Brazil versus the FOB the Gulf is $0.60 a bushel cheaper and the Ukraine is $0.90 a bushel cheaper. It is the cheaper world values that are anchoring the market."
Corn for December dropped 1.9% to $4.51 a bushel, a one-month low.
Corn vs wheat
And that boded ill for wheat too, despite the improved idea over prices as concerns over Argentine and Russian crops, and overall world quality, have grown this month.
"Wheat now has better fundamentals compared with corn, but the wheat-corn spread is nearing a stiff $2 a bushel, wheat over corn," US Commodities noted.
OK, "the Argentine wheat areas have been dry and many feel that the crop has been trimmed to 12m tonnes," Mr Holaday noted.
And Benson Quinn Commodities flagged that, for wheat, "strong weekly US exports sales reported yesterday and developing weather concerns in South America and quality issues in Russia are seen as supportive factors, along with an improved technical structure".
But wheat for December tumbled 1.6% to $6.46 ¼ a bushel, getting back within 5 cents of that $2-a-bushel premium over December corn.
'Bearish on arabica coffee'
Soft commodities eased too, little helped by a return by Brazil's real to the back foot, losing 0.7% against the dollar, and so lowering in dollar terms values of crops in which Brazil is a major player.
These include arabica coffee, which dropped 1.0% to close at 114.65 cents a pound for December delivery, continuing to feel pressure too from ideas of ample supplies.
"We remain bearish on arabica coffee due to expectations of a bumper crop which would provide abundant supplies," Joyce Liu at Phillip Futures said.
Brazil;s Conselho Nacional do Café also noted continued pressure on prices from data showing comfortable stocks of green coffee in the US, and the "expectation of development-friendly rains for Brazilian coffee plantations".
Many of the Brazilian areas for which MDA forecast rain (above), such as Parana and Minas Gerais, are coffee-growing regions.
Rain disruptions
However, such ideas of Brazilian rains were more supportive for raw sugar futures, in speaking of interruptions to cane harvesting, and therefore output of the sweetener.
Raw sugar for October bucked the negative trend, just, by adding 0.01 cent to 17.18 cents a pound.
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