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Why a Price Recovery for FCOJ Futures Has Started

FCOJ was higher last week and trends are up on the daily and weekly charts. A price recovery has started as the harvest winds down. The recent market weakness has been dramatic since the market made new contract highs earlier this month. The weather remains generally good for production around the world for the next crop.

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Wheat: Wheat markets were higher last week after a week of choppy trading.  News that Ukraine thinks it can export via the Black Sea even with the Russian bombing was negative for the market as were reports from the crop tour that the Dakotas Spring Wheat crops have above-average yield potential for the year.  Russia said exports of Wheat have increased significantly so far this season.  Russia had bombed the Odessa port and maybe more ports in Ukraine. Both countries along with the UN had come to an agreement to allow for Ukrainian grain exports from the Black Sea but then Russia blew up the port the next day and threw the whole agreement into doubt.  Those doubts increased earlier this week as new reports suggested more bombing was going on.  It is thought to be unlikely that much will move from Ukraine right away as the infrastructure internally and at the ports needs to be rebuilt and now more damage has been added to Ukrainian ports.  It is also unknown how much Wheat and Corn could be available for export even with no infrastructure problems as many areas have been bombed by the Russians.  Trends are mixed in all three markets.  Export demand is thought to be improving as US prices are now competitive in the world market and many are still scared to send boats into the Black Sea to pick up Russian or Ukrainian Wheat.  Hot and dry weather is back for this week in the central and southern areas. Northern Plains and Canadian Prairies weather has been improved with showers and storms but is still variable.  Europe is too hot and dry.

Weekly Chicago Soft Red Winter Wheat Futures 

Weekly Chicago Hard Red Winter Wheat Futures

Weekly Minneapolis Hard Red Spring Wheat Futures

Corn:  Corn closed higher last week on buying tied to the weather forecasts that featured a return to hot and dry weather and on the lower-than-expected crop condition ratings released Monday by USDA.  The bombing of the Odessa port in Ukraine by Russian armed forces was also a reason to buy Corn as Corn is a big export item for Ukraine.  Some selling was seen and was tied to worries about the world economic health and Corn demand moving forward and news that Ukraine thinks it will still be able to export through the Black Sea even with the Russian bombing.   Corn is a weather market again as hot and dry forecasts returned for at least the next couple of weeks.  Crop condition ratings were a little worse than expected by the trade in the Monday USDA reports and look to suffer more when the hot weather returns to the Midwest from the Great Plains.  The weather is just too variable in the US for top production and yields.  Basis levels in the Midwest are strong amid light farm selling.

Weekly Corn Futures

Weekly Oats Futures

Soybeans and Soybean MealSoybeans and both products were higher last week on what appeared to be speculative buying as the weather forecasts became hot and dry again after some showers early this week and as USDA showed more deterioration in the crop condition ratings released on Monday than the trade had expected.  Futures were led higher by August with the market clearly looking for Soybeans sales from producers and not finding any as many producers appear to be sold out.  Many Midwest areas got rain in the last week or two and could be in line for more showers this week before the hot and dry conditions return.  More crop condition losses are possible in the coming weeks as the hot and dry weather arrives just in time for pod setting and filling.  Basis levels are still strong in the Midwest. There are still renewed Chinese lockdowns and China has been importing less as a result.  There are currently lockdowns to varying degrees in Shanghai, Shenzhen, and Wuhan.  There is less Chinese demand for Soy products due to the lockdowns there.  The lockdowns are now for one week instead of one month as they were before.  Ideas are that purchases could increase as the lockdowns and port closures are finally eased by the government there.  China has been a major buyer of US Soybeans this year after a very slow start due to the problems in South America. 

Weekly Chicago Soybeans Futures:

Weekly Chicago Soybean Meal Futures

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Rice: Rice was slightly higher last week with the harvest under way in Texas.  Yield reports have been variable.  Trends are turning up again on the daily charts.  It remains very hot and dry in Texas and the other growing areas are likely to see hot and dry conditions over the next couple of weeks.  Crop conditions are mostly good to excellent for now in Arkansas but the weather could turn hot and dry and hat could hurt overall production potential.  Mississippi and Louisiana are called in good condition but crops in these states could also be stressed for the next couple of weeks.  Texas Rice is developing with water availability from the lakes very limited this year and maybe next year. 

Weekly Chicago Rice Futures

Palm Oil and Vegetable Oils: Palm Oil was higher last week on news that China had committed to buy another 1.0 million tons of Palm Oil from Indonesia.  It was positive demand news for a market that needed some new demand.  Malaysia and Indonesia are making moves to expand demand in the face of increasing supply.  Refiners in Malaysia have pledged to lower the price of cooking oil for internal consumption in an effort to help control inflation.  Indonesia is offering incentives to move the product into domestic and export channels.  Export reports from the private sources are showing weaker demand this month and this has been the trend for the last few months.  Production from Malaysia is expected to increase as well as the Covid lockdowns finally go away and as the weather is good for production.  Canola was higher along with Soybean Oil and Palm Oil.  Crude Oil was also higher and the rally in petroleum supported rallies in vegetable oils.  The growing conditions are much improved with rans being reported in recent days but the rains are bringing some concerns about disease showing. 

Weekly Malaysian Palm Oil Futures

Weekly Chicago Soybean Oil Futures

Weekly Canola Futures:

Cotton: Cotton was higher last week and trends are trying to turn up in this market but so far the trends remain sideways.  The trade is still worried about demand moving forward due to recession fears and Chinese lockdowns but is also worried about total US production potential.  The USDA crop condition rating were a little lower again this week with the biggest problems still found in Texas.  Conditions in Georgia and the rest of the Southeast and Delta appear to be mostly good to excellent.  The Chinese had been reopening the economy and country lately as Covid faded, but some reports of a new variant found there could shut the country down again in the near term.  The quarantine is one week now instead of one month as before.  The cities of Shanghai, Shenzhen, and Wuhan are all subject to lockdowns of one type or another.  It is possible that the continued Chinese lockdowns will continue to hurt demand for imported Cotton for that country and that a weaker economy in the west will hurt demand from the rest of the world.  Current weather forecasts call for hot and dry conditions for much of the Great Plains including west Texas Cotton area. 

Weekly US Cotton Futures

Frozen Concentrated Orange Juice and CitrusFCOJ was higher last week and trends are up on the daily and weekly charts. A price recovery has started as the harvest winds down. The recent market weakness has been dramatic since the market made new contract highs earlier this month. The weather remains generally good for production around the world for the next crop. Brazil has some rain and the conditions are rated good. Weather conditions in Florida are rated mostly good for the crops with some showers and warm temperatures. 

Weekly FCOJ Futures

CoffeeNew York and London were higher last week on renewed fund and other speculator buying interest.  Some speculative long liquidation was noted late in the week before the end of the month.  Trends are mixed on the daily charts in both markets.  Certified stocks keep dropping but GCA stocks are holding strong.  Demand for Coffee overall is thought to be less but the cash market remains strong.  There is less Coffee on offer from origin, with Brazil offering less and Central America and Vietnam offering less as well.  The weather in Brazil is good for Coffee production and any harvest activities.  Temperatures are above normal in Brazil and conditions are mostly dry.  The dry weather is raising some concerns about the next crop potential but it is normally dry at this time of year. 

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Weekly New York Arabica Coffee Futures

Weekly London Robusta Coffee Futures

SugarNew York and London closed a little lower last week on what appeared to be speculative selling based on production data from Unica in Brazil.  Unica estimated the Sugar production at about 2.97 million tons, above trade estimates near 2.84 million.  Sugarcane crushed totaled 46.34 million tons.  The selling in these markets has been relentless for the last week to 10 days.  The New York market is worried that the lack of clarity about ethanol demand in Brazil will force mills down there to produce more Sugar for export.  The London market had been looking for increased supplies from origin and now is more worried about demand after recent price strength.  Trends are down in New York and in London.  Brazil is reported to have a big crop of Sugarcane coming and as it is harvesting its crop of Sugarcane and turning much of it into Ethanol but is still making some Sugar and some of that Sugar is making it into export channels.  The production mix could change in the short term to include more Sugar.  Reports from India indicated that conditions are generally good for Sugar production.  Monsoon rains have been good in India this year. 

Weekly New York World Raw Sugar Futures

Weekly London White Sugar Futures

CocoaNew York and London were a little lower last week.  Supplies of Cocoa are as large as they will be now for the rest of the marketing year but the market is trying to hold the recent lows.  Trends are turning up in both markets.  Reports of sun and dry weather along with very good soil moisture from showers keep big production ideas alive in Ivory Coast.  Ideas are still that good production is expected from West Africa for the year. The weather is good for harvest activities in West Africa but the harvest should be winding down now. Current reports from Ivory Coast indicate that the weather is a good mix of sun and rain. The weather is good in Southeast Asia.  Ivory Coast arrivals are now estimated at 2.013 million tons for the current marketing year, down 4.1% from the previous year. 

Weekly New York Cocoa Futures

Weekly London Cocoa Futures

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(Featured image by stevepb via Pixabay)

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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.