Coffee soars. But Cindy proves mixed blessing for row crops


Fifth time lucky.

Commodity prices managed a bounce heading into the weekend, allowing the CRB index to close higher for first time this week, if by a modest 0.7%, recovering from a 14-month closing low to the last session.

But not all ags joined in with the revival.

Blistering beans

Certainly, many dived in with gusto.

Arabica coffee futures notched up their biggest one-day rise a year in New York, bouncing 5.6% from a 16-month closing low to end at 123.00 cents a pound for September delivery.

The rebound tallied with ideas that the selling which had shrunk the arabica premium over robusta coffee to its lowest since at least 2008 in the last session had gone too far, as reported earlier.

In fact, arabica futures far outpaced robusta coffee for September, which added 2.4% to $2,078 a tonne, but nonetheless allowed the arabica premium to rebuild to nearly 29 cents a pound.

'Due a rally'

Also in New York, raw sugar for July gained 0.8% to 13.17 cents a pound – albeit only after touching a fresh 16-month low of 12.76 cents a pound.

"The markets are oversold and due a rally," said Sucden Financial, if adding that "it is hard to step in when the selling is so relentless, and it is doubtful that a rally could be sustained long enough to force short-covering in size, so may be temporary".

What did help sentiment was recovery in oil prices, which is linked to sugar via ethanol (a rival product to the sweetener from cane/beet processing).

Brent crude added 0.9% to 45.62 a barrel, positing a second-successive positive session, and recovering further from seven-month lows.

'Approached unbelievable'

Cotton managed a bit of a pre-weekend recovery in New York too, adding 0.4% to 67.02 cents a pound for December delivery, if only after touching a fresh nine-month low of 66.33 cents a pound earlier.

Louis Rose at Rose Commodity Group again underlined the decent US weekly export data as released on Thursday, saying that "demand for US bales for export remains extremely strong.

"Total sales against 2017-18 approached unbelievable at almost 435,000 running bales."

"Many organisations have noted the recent slowdown in old crop sales and shipments, but it is now the new crop data that we should be mostly concerned with.

"And demand for US bales yet to be harvested is exceptional."

'Flash flood and tornado warnings'

The cotton market is also keeping an eye on the course of Tropical Storm Cindy, which made landfall near the Texas-Louisiana border, ie in prime cotton-growing country.

"The system has brought rainfall and will bring more accumulations across most of the Mid- South and South Eastern US cotton growing areas as it moves east/northeast out of Louisiana," Mr Rose said.

"Total accumulations are expected to be 2-6 inches with localised heavier amounts with flash flood and tornado watches and warnings posted across much of the south."

Ie, there is cause for concern among cotton growers over the extent of rains, as well as optimism over the coming of moisture.

'Weather leans negative'

For investors in other row crops, however, notably corn and soybeans, it appeared the hopes for rains brought by Cindy which were really in play.

"Weather leans negative [for prices], with the tropical storm throwing more precipitation into the central and eastern Midwest than expected," said Richard Feltes at RJ O'Brien.

"Nearly the entire Midwest will benefit from 1-3 inch rains during the 6-10 day period while the entire mid section of US enjoys cooler-than-normal temperatures for next week."

MDA said that "the remnants of Tropical Storm Cindy will bring heavy rainfall to the Delta today and will enhance rainfall across the south eastern Midwest later today, improving soil moisture for corn and soybeans.

"The 6-10 day period has continued to trend wetter, with above normal rainfall expected" for the Midwest, the weather service added.

South America vs US

Meanwhile, there remain worries on the demand side over the enhanced competition that US corn faces from rrival South American supplies.

"South American export offers are undercutting [US] exports in a big way right into new crop," said Tregg Cronin at Halo Commodity Company.

"There's no Brazilian drought this year to make the US the only game in town."

Corn futures for July dropped 1.0% to $3.57 ѕ a bushel, an eight-month closing low.

'Short covering/profit taking'

Soybean futures fared a little better, despite too seeing US production prospects favoured by US weather.

CHS Hedging flagged support from "short covering/profit taking after yesterday's blow-out", which saw the July contract record the weakest close for a spot contract in 14 months.

Furthermore, there was minor support by a plan by Paraguay, South America's third-ranked soybean exporter to put a 10% tax on shipments – a proposal approved by the country's senate, but which could yet be undone by government opposition, after farmer protests.

Meanwhile, China reminded of its firm import demand, up to now, reporting imports so far in 2017 at 37.1m tonnes, a 20% jump year on year.

Still, although soybeans for July did manage to close 0.2% higher at $9.04 Ѕ a bushel, it was the only contract in the complex ending up.

'Dry weather is expected'

As for the wheat complex, Minneapolis spring wheat did manage to close higher, adding 0.8% to $6.61 ј a bushel for July, a fresh two-year closing high for a spot contract, and 0.8% to $6.66 ј a bushel for September delivery, continuing to gain support from northern US drought.

"Dry weather is expected through early next week in the northern Plains, maintaining significant soil moisture deficits and stressing spring wheat," MDA said, if adding that moisture looked on the way later next week.

"Many US yield estimates are already 40 bushels per acre or below, which would automatically push production below 400m bushels and put us in extreme rationing mode," said Halo Commodity Company's Tregg Cronin.

 However, winter wheat again got caught by a negative undertow from corn, dropping by 0.3% to $4.59 ѕ a bushel in Chicago for July delivery, and by 0.5% to $4.73 Ѕ a bushel for September.

Even so the July contract closed back above $1.00 a bushel above July corn, a premium 75% higher so far this month.

It was some help to Chicago wheat that the condition of the French crop was downgraded again, after hot weather which is viewed as having been deleterious for output.

"The market is seeing some support in the heatwave sweeping through Europe," CHS Hedging said.

That said, "a cooler forecast for France has the market down from recent highs".

Paris wheat for December did manage to close higher, but by a modest 0.3% at E178.00 a tonne.

'Concern for wheat, corn, and sunflowers'

Worries over Ukraine's crops also remain live.

"Dryness remains a concern for development of wheat, corn, and sunflowers across Ukraine, Belarus, and far southern Central Region" of Russia, said MDA.

"Showers are expected in Belarus and Ukraine today and again on Monday, which should lead to minor improvements, but more rainfall will still be needed."


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