Wednesday , 17 January 2018

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Coffee futures tumble as Brazil rain hopes rise

Coffee futures tumble as Brazil rain hopes rise

The dryness worries in Brazil eased a notch.

The outlook for many central and southern areas of the country next week “is wetter”, MDA said.

Noting that “an upturn in rains would be helpful to improve moisture for the upcoming corn and soybean crops,” the weather service said that “rains are expected to return to west central and south central areas next week, which should begin to replenish moisture”.

This is good news for many coffee and sugar cane growing areas (indeed, Minas Gerais, Brazil’s top coffee growing state, is the biggest main crop corn grower too) although some of these may have to wait for a little longer for relief, MDA said.

Coffee, sugar prices plunge

In fact, New York arabica coffee futures for December tumbled by 3.6% to 135.35 cents a pound, although just managing to stay above their 100-day moving average, at 135.17 cents a pound.

(A shy away in the last session from the 200-day moving average, at 143.36 cents a pound, and lower close was viewed as a negative technical signal for this one.)

And raw sugar futures tumbled too, by 3.8% to 14.37 cents a pound, in a decline some saw as fuelled by the Brazilian weather outlook too, in boosting prospects for cane yields ahead.

White vs raws

Still, other factors were mentioned too, with Sucden Financial noting the “threat of ‘late’ producer pricing coming into/hanging over the market”.

Australia’s Abares cut its forecast for raw sugar futures in 2017-18 to a 10-year low of 13.0 cents a pound.

At US broker Price Futures, Jack Scoville highlighted that recent strength in raw sugar prices “flies in the face of cash market data that showed weakening differentials between white sugar and raws.

“Weaker differentials imply either too much production or too little demand, or both,” he said, with white sugar, in being more immediately available to users than raw sugar, which requires processing, being seen as a better indication of spot consumption needs.

‘China still buying’

In grain markets, the prospect of improved Brazilian weather is a negative for values of corn and soybeans, implying better prospects for the ongoing sowing seasons.

Still, investors had other dynamics to look at in these markets too including, in the case of soybeans, ideas of decent demand, even though the US Department of Agriculture broke with recent tradition and failed to announce a US export sale through its daily alerts system.

Richard Feltes at RJ O’Brien indeed flagged that there was “nothing on daily sales today”.

However, cash sources were reporting that US Pacific North West ports were “aggressively offering soybean cargos, and that China is still covering October needs and wide open for September”, Mr Feltes added.

‘Demand is poor’

Indeed, soybean futures were relatively muted in their decline, easing 0.1% to $9.65 ½ a bushel for November delivery, earlier bouncing back from their 100-day moving average at $9.60 a bushel.

Extra support came from soyoil, which surged 1.1% to 34.76 cents a pound for December delivery, amid what appeared to be manic session for oil-meal spreading, with soymeal futures for December easing 1.1 to $308.70 a short ton.

Corn, meanwhile, dropped 0.9% to $3.48 ¼ a bushel for December – the contract’s second lowest close (ahead of the $3.45 ½ a bushel seen on August 30), lacking support from export appeal.

“Demand for US corn is poor,” said CHS Hedging.

“Old crop stocks are plentiful and cash markets are weak, despite the lack of farmer selling.”

Harvest results

It was a theme taken up by RJ O’Brien’s Richard Feltes too, who flagged “more chatter farmers globally are long corn and anxious to price on modest rallies”.

And supplies are only going to increase as the US harvest ramps up, adding to pressure on prices as last vestiges of risk premium are removed too.

At Country Futures, Darrell Holaday, saying that while “we have definitely not had enough harvest to draw dramatic conclusions… I do think it is fair to say that when analysing the limited amount of yield reports that they would be on the plus side of expectations.

“The early data would be slightly positive on corn and soybeans” in production terms “in comparison with expectations”.

Wetness concerns, dryness worries…

Wheat futures managed a late recovery nearly to positive territory, easing 0.1% to $4.43 bushel lacking harvest pressure, and indeed with worries growing over Australian and Argentine crops, from conditions too dry and too wet respectively.

For Argentina, “additional active rains in the 6-10 day period will maintain wetness concerns,” said MDA.

For Australia, the weather service said that “dryness remains widespread across Queensland and New South Wales, with no significant improvement expected over the next 10 days”, although at least frost risks seem to be easing.

At Halo Commodity Company, Tregg Cronin took issue with the USDA’s latest forecast for Australian exports in 2017-18 of 18.5m tonnes, saying that there was no-one in the country who believes that figure “is close to realistic with most estimates already at or below 14m tonnes”.

Prices rise

Certainly, Australian wheat prices have continued to bounce, with east coast futures for January overnight adding a further 1.3% to Aus$277.00 a tonne, and are now up 9.5% this month.

Prices elsewhere gained too, with Paris futures for December edging 0.3% higher to E162.00 a tonne, and London’s November contract adding 0.5% to £139.90 a tonne, despite strengthening in both the euro and sterling against the dollar.

Results of a tender by Egypt’s Gasc, while resulting in a 175,000-tonne Russian order, at least showed Russia was not desperate for the business.

Meanwhile, markets appeared to shrug off an updated estimate (from satellite data, etc) of 27.13m tonnes for the Canadian wheat harvest, well above the 25.54m tonnes estimated three weeks ago from a farmer survey.

For canola, Tuesday’s report showed a Canadian harvest of 19.71m tonnes this year, well above the survey estimate of 18.20m tonnes.

Still, Winnipeg canola futures for November added 0.5% to Can$492.10 a tonne.

(Source ––4266.html)

Coffee futures tumble as Brazil rain hopes rise Reviewed by on . The dryness worries in Brazil eased a notch. The outlook for many central and southern areas of the country next week "is wetter", MDA said. Noting that "an upt The dryness worries in Brazil eased a notch. The outlook for many central and southern areas of the country next week "is wetter", MDA said. Noting that "an upt Rating: 0
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