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Coffee Markets Decline Despite Looming Robusta Supply Shortages

Both coffee markets closed lower last week despite short supplies that could be made worse by ideas of reduced offers of Robusta and on forecasts for another couple of weeks of dry weather in Vietnam. There were also reports of poor Robusta yields in Brazil during the harvest. Ideas of less production in Vietnam are driving the rally.




Wheat: Wheat was lower in all three markets again last week but Winter Wheat held to trading ranges for much of the week as the US harvest expands and even as adverse world growing conditions are still around. Spring Wheat markets maintained a down trend.

There are more reports of hot temperatures coming this week to Russian growing areas. It has also been very dry there. The weather is still a key, with extreme dryness reported in Russia and parts of the US and too wet conditions reported in Europe. However, US producers are reporting strong yields that exceed expectations so far and very good conditions. Big world supplies and low world prices are still around.

Weekly Chicago Soft Red Winter Wheat Futures

Weekly Chicago Hard Red Winter Wheat Futures

Weekly Minneapolis Hard Red Spring Wheat Futures

Corn: Corn closed a little higher last week on news that Brazil has proposed new export taxes on Agricultural goods of 20% and on reduced production estimates from CONAB. Congress must approve the measure, but farmers there are already reported to be halting sales to see what happens next. The US Midwest is still seeing good growing conditions.

The market anticipated that crop condition ratings would be very high in the USDA reports last week and will anticipate high crop ratings this week. Oats were lower on good growing conditions found in the northern US and into Canada. The weather in the Midwest has been very wet but it is drier and warm now. Demand has been a force behind the rally. Increased demand was noted in most domestic categories along with rising basis levels, and export demand has been strong.

Weekly Corn Futures

Weekly Oats Futures

Soybeans and Soybean Meal: Soybeans and the products closed mostly higher last week, but held to trading ranges, on good growing conditions in the US against reports of increased taxes for Brazil farmers. Support also came from reduced production estimates from CONAB. The government there has proposed a new tax on farm production and exports of up to 20%. Congress must approve the measure, but reports indicate that Brazil farmers are pulling back from sales to see what happens next.

There were wire reports that China prices are weakening amid veery strong imports from Brazil. Reports indicate that China remains an active buyer of Soybeans in Brazil but has cut back on demand if the domestic market does not improve and on ye tax issues in Brazil. Some of that demand has moved to the US. China said that it has increased exports of Soybean Meal due to the weaker internal demand. Domestic demand has been strong in the US but has suffered as crushers were crushing for oil. Oil demand has suffered as cheaper alternatives for feedstocks hit the biofuels market.

Weekly Chicago Soybeans Futures

Weekly Chicago Soybean Meal Futures

Rice: Rice closed little changed last week after seeing some wild price action as the July contract continues to liquidate longs and shorts in a violent way. The big US crops are now in doubt from reports of extreme rains in southern growing areas and especially near Houston.

Supply tightness is expected to give way to increased production this year and greatly increased supplies this Fall. These ideas are reflected in the prices seen in the old crop and the new crop. Big storms have brought significant rains to crops in Texas, but the weather is better now.

Weekly Chicago Rice Futures

Palm Oil and Vegetable Oils: Palm Oil was a little higher last week on stronger demand ideas. Export demand has been very strong in recent private reports. There is talk of increased supplies available to the market, but the trends are up on the daily and weekly charts. Canola was lower on reports of generally good conditions in Canada and as the Canadian Dollar rallied.

Weekly Malaysian Palm Oil Futures:

Weekly Chicago Soybean Oil Futures

Weekly Canola Futures

Cotton: Cotton was lower last week as growing conditions are good and demand is not. USDA will issue new crop ratings today and the ratings are expected to remain generally high. Big storms were reported in Texas recently that could damage crops.

There are also some big problems with too much rain in the Delta and Southeast in recent weeks. Demand has been weaker so far this year but there are hopes for improved demand with the lower prices. Chinese consumer demand has held together well, and Chinese demand for Cotton has started to increase.

Weekly US Cotton Futures

Frozen Concentrated Orange Juice and Citrus: FCOJ closed higher on Friday in correction trading, but a little lower for the week. The daily charts show that the market is trying to form a bottom but the work is not done yet. The market remains well supported in the longer term based on forecasts for tight supplies and very hot weather in Florida.

The reduced production appears to be at the expense of the greening disease. There are no weather concerns to speak of for Florida or for Brazil right now. The weather has improved in Brazil with some moderation in temperatures and increased rainfall amid reports of short supplies in Florida and Brazil are around but will start to disappear as the weather improves and the new crop gets harvested.

Weekly FCOJ Futures

Coffee: Both coffee markets closed closed lower last wek despite short supplies that could be made worse by ideas of reduced offers of Robusta and on forecasts for another couple of weeks of dry weather in Vietnam. There were also reports of poor Robusta yields in Brazil during the harvest. Ideas of less coffee production in Vietnam are driving the rally.

There were indications that Brazil and Vietnam coffee producers were now offering Coffee, but in small amounts. Vietnamese producers are reported to have about a quarter of the coffee crop left to sell or less and reports indicate that Brazil coffee producers are reluctant sellers for now after selling a lot earlier in the year. Coffee exports from Brazil have remained strong.

Weekly New York Arabica Coffee Futures

Weekly London Robusta Coffee Futures

Sugar: Both markets closed lower Friday on harvest progress in Brazil, but were higher for the week and the charts show that trends are turning up. Trends are mixed to up on the daily charts and up on the weekly charts. End users need Sugar but are not finding too much available in the cash market.

There are still ideas that the Brazil harvest can be strong for the next few weeks amid dry harvest weather, but now the cry weather is causing concern about developing Sugarcane in center south areas. Harvest weather is called good in center-south Brazil. There are worries about the Thai and Indian production, but data shows better than expected production from both countries.

Weekly New York World Raw Sugar Futures

Weekly London White Sugar Futures

Cocoa: Both markets were higher last week, and chart trends are still up. Production concerns in West Africa as well as demand from nontraditional sources along with traditional buyers keep supporting fu-tures. Production in West Africa could be reduced this year due to the extreme weather which includ-ed Harmattan conditions.

The availability of Cocoa from West Africa remains very restricted and pro-jections for another production deficit against demand for the coming year are increasing. Ideas of tight supplies remain based on more reports of reduced arrivals in Ivory Coast and Ghana continue. Demand continues to be strong, especially from traditional buyers.

Weekly New York Cocoa Futures

Weekly London Cocoa Futures

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Jack Scoville is a futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. In addition to writing daily market commentaries in both English and Spanish, he offers brokerage services to an international clientele of agricultural producers, processors, exporters, and other professional traders. He is regularly quoted by major wire services including Dow Jones, AP, and Reuters. His comments are sourced by newspapers around the world and on various radio and television programs.