Cocoa Futures Were Lower on Ideas of Good Midcrop Production

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Wheat:  Wheat markets were sharply higher last week on poor overall crop conditions for the HRW crops in the western Great Plains and HRS in the Northern Plains and into the Canadian Prairies and in response to the USDA production and WASDE estimates. The world-ending stocks estimates were especially bullish as USDA forecast record trade volumes for world Wheat. Ukraine’s exports were reduced due to the war.  USDA reduced production estimates for Hard Red Winter Wheat in the US due to the hot and dry conditions in the western Great Plains and reduced Spring Wheat production estimates due to delayed planting.  Spring Wheat planting remains much behind normal and overall Spring Wheat planting could be reduced because of the delayed planting pace.  The weather forecast looks improved for the planting of the US and Canadian Spring Wheat crops as it should be warmer but there was a big storm in the Dakotas last week that blew topsoil from the region.  Trends are turning up in all three markets on the daily charts. Russia have been offering into the world market at relatively cheap prices but the Wheat is moving from the Black Sea although a lot of ships are scared to go on those waters.  Ukraine can rail Wheat to Romania for shipment and has been doing this, but there have been a lot of news stories about the Russian theft of Ukrainian grain.  There are forecasts for some light precipitation to fall in HRW growing areas of the western Great Plains this week and more moderate weather is forecast for the northern Great Plains and Canadian Prairies.  The northern Great Plains and Canadian Prairies should get showers.  The western US Great Plains remained too dry and crop conditions were very poor.  

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 slow planting progress and despite forecasts for better planting weather this week. Oats closed a little lower. USDA cited the slow planting progress in cutting yield estimates to 177 bushels per acre from the trend line yield of 181.5 bushels per acre.  The yield estimate is within the thinking of the trade, but USDA has started there with the May estimate and the timing was very unusual. USDA has always made those adjustments later in the crop year and has started with the trend line yield in previous years. Very warm temperatures are being reported in the Midwest this week and ideas are that planting progress is about to increase rapidly. Planting progress will be faster, but fields still need to dry out so it could still be a couple of days before many producers can work the fields.  The crop planting progress is very slow now due to the cold and wet Spring seen here and the market started to worry about yield loss soon. Many think the top end of the yield has been taken off the Corn crop due to the delayed planting. It already thinks there is reduced planted area because of the March planning intentions reports from USDA and the bad planting weather. The potential loss of Ukraine exports of Corn makes the world situation tighter. China has a Covid outbreak again and has closed some cities and some ports in response.  The moves are harsh but China has a no tolerance policy about the pandemic. The closings of cities and ports will hurt the economy as people can’t make or spend money and hurt imports as there will be fewer places to unload cargoes.  However, China has been a very big buyer of US Corn over the last couple of weeks as they need the feed and Ukraine cannot currently offer any supply.  President Biden has said he will permit the use of higher ethanol blends in gasoline this Summer in an effort to control inflation and high fuel prices. 

Weekly Corn Futures

 Weekly Oats Futures

Soybeans and Soybean MealSoybeans were higher along with Soybean Meal, but Soybean Oil closed slightly lower last week.  The market rallied on stronger demand ideas and even with the neutral to bearish USDA data released on Thursday.  USDA estimated high production at 4.640 billion bushels, but demand ideas were strong and the ending stocks estimate was 310 million bushels, from 235 million in the current crop year. South American production estimates were also increased. There are still fears of a cooling economy and forecasts for much improved planting weather this week, but the delayed planting pace helped support the market yesterday. Soybean Oil remains well supported as demand is holding strong amid very tight supplies of vegetable oils here and around the world. Almost summer-like conditions are being reported this week after weeks of cold and wet weather for the Midwest so planting progress should increase.  There are still many wet fields so the planting progress for Corn and Soybeans might not be as strong as the trade expects when USDA reports again next Monday.  There are still worries about Chinese demand because of Covid lockdowns there.  China has been a major buyer of US Soybeans this year after a very slow start due to the problems in South America.  They are buying for this year and already have booked a large amount of new crop Soybeans to cover future needs.  Most of the current buying is for next year.  Ideas are that the Chinese economy could slow down due to the Covid lockdowns there and cause the country to purchase less Soybeans in the world market. 

Weekly Chicago Soybeans Futures:

Weekly Chicago Soybean Meal Futures

Rice: Rice was higher last week and closed a new highs for the move on the daily and weekly charts.  USDA issued a price positive WASDE report that highlighted less production, demand, and ending stocks for next year from the current year. Production was estimated at 182.7 million cwt and ending stocks were estimated at 33.2 million cwt. Trends for both have been down for at least the last two years.   Funds and other speculators have been the best sellers lately on demand concerns and as planting and growing conditions improved in the US.  There still was slow progress in Rice planting and emergence in the US, but improved weather this week could allow producers to start to catch up.  The slow progress and wet and cold conditions in Arkansas have many looking for a lower planted area and all planted area is expected to be less, anyway, due to high input costs against the price of Rice. 

Weekly Chicago Rice Futures

Palm Oil and Vegetable Oils: Palm Oil was lower last week but the most active August contract traded in a range.  Ideas are that demand for Malaysian Palm Oil is weaker and that monthly stocks are increasing.  The Indonesian ban on Palm Oil products imports is now in effect and a ban on Crude Palm Oil exports is coming, according to the Indonesian government.  The industry estimates the ban could last through the month of May, but the government has made no such prediction.  Hopes for better demand from India keep the market supported.  A new Covid outbreak is reported in China and cities and infrastructure has been shut down, including some airports and water ports.  The economy could slow down and affect demand.  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 last week and made new highs for the move.  Trends turned up on the daily charts on Friday.   It is reported to be very dry and has been cold for planting.  StatsCan said that Canadian farmers intend to reduce planted area for Canola this year and use the area to plant Wheat instead.  There are ideas of reduced Sunflower export potential from Russia and Ukraine. The market is worried about South American production as well.  Canada produced a very short crop of Canola last year so supplies are tight. 

Weekly Malaysian Palm Oil Futures

Weekly Chicago Soybean Oil Futures

Weekly Canola Futures:

Cotton:  Cotton was lower last week, but rebounded from the lows of the week to close moderately lower as dry conditions in the western Great Plains continue.  USDA estimated production for the coming year at 16.50 million bales and this was below trade expectations.  Demand was also cut, but ending stocks were estimated at just 2.9 million bales for the new crop year, down from 3.4 million in the current crop year.  USDA said that planted area was less than had been previously forecast due to the hot and dry weather in the western Great Plains.  The trade is worried about Chinese demand due to the Covid lockdowns there.  India will now try to increase imports as world and US Cotton is now lower cost to importers as import taxes have been removed, but prices for imported Cotton are still very high.  Production of the next US crop is at risk now due to dry weather in general for the western Great Plains.  China could be trimming imports due to Covid and is also closing down a number of cities as the Covid spreads through the nation.  China has been buying even with the port closures and domestic difficulties caused by renewed Covid lockdowns. 

Weekly US Cotton Futures

Frozen Concentrated Orange Juice and CitrusFCOJ was lower last week and trends are down on the daily charts. USDA increased its Florida and US production estimates by about 2 million boxes to 40.2 million boxes. USDA had been cutting production in previous estimates. The market is short Oranges and short juice production but is also worried about domestic demand destruction as pills are becoming cheaper again. The greening disease has taken its toll on the US crop and the previous Brazil crop was down significantly due to drought. The weather remains generally good for production around the world for the next crop. Brazil has some rain and conditions are rated good, but it is drier now and some tree stress could develop soon.  Weather conditions in Florida are rated mostly good for the crops with some showers and warm temperatures. 

Weekly FCOJ Futures

Coffee:  New York and London were lower early last week, the New York rebounded to close a little higher on some forecasts for a Brazil freeze.  It could freeze in at least Parana and crops could be damaged.  London rebounded as well but still closed lower for the week.  The export pace from Cecafe was 2.8 million bags, down 24% from the previous year.  There are fears of a cooling economy and less demand due to actions last week from the Fed, but strong earnings reports from coffee shop chains imply that demand is holding together well. The Ukraine war is also supporting ideas of less demand from Europe generally and Ukraine and Russia. Demand from China is thought to be less due to the war against Covid.  Deliveries from Vietnam and Brazil Robusta are noted to be decreasing as the harvest is now complete, but selling was active in previous months.  Indonesian offers are higher now after a slow start to the selling campaign due to plentiful stocks inside the country.  Good growing conditions for the next crop in Brazil are still around but some regions could be turning too dry again.  Colombia Coffee Federation said last week that production could be between 12.0 and 12.5 million bags this year after heavy rains fell during the crop development.  

Weekly New York Arabica Coffee Futures

Weekly London Robusta Coffee Futures

SugarNew York and London closed a little higher last week with the best gains seen in London.  The price action implies renewed demand for White Sugar has appeared in the world market.  The US Dollar was strong and has been strong to drive up the price in local currencies of the importers and exporters, but the sell-side knows futures have fallen and are holding.  Increased offers from India and Thailand are expected if the market rallies.  Pakistan is also increasing its offers due to good crops there.  All are primarily exporters of White Sugar while Brazil exports more Raw Sugar. Thailand expects to produce about 10 million tons of sugar this year, up 33% from last year.  India said it could export more than 9.0 million tons of Sugar.  Brazil could also have better Sugarcane production this year. Brazil mills are crushing for Ethanol at this time and not Sugar. The overall crush pace is down significantly due to mills being closed. The crush was down 19.7% last month at 23.8 million tons of cane and the production mix is now 35.4% Sugar and 64.6% Ethanol. 

Weekly New York World Raw Sugar Futures

Weekly London White Sugar Futures

CocoaNew York and London were lower last week on ideas of increasing supplies available to the market. The weather is good for harvest activities in West Africa. Current reports from Ivory Coast indicate that the weather is a good mix of sun and rain so a good midcrop production is expected. The weather is good in Southeast Asia. Ghana arrivals have been below year-ago levels, but Ivory Coast arrivals are ahead of last year. Ivory Coast arrivals are now 1.770 million tons, down 3.2% from last year.

Weekly New York Cocoa Futures

Weekly London Cocoa Futures

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(Featured image by Salah Ait Mokhtar via Unsplash)

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Author: Jack Scoville, Markets – Born2Invest

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