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Corn futures end losing streak. Wheat prices jump, for once

The last time corn futures rose, Mexico, Uruguay and the US were still in the World Cup, and you would have received heady odds for betting that Germany would beat Brazil 7-1.

But they did so gain on Monday, for the first time in 10 sessions, taking the December corn contract 0.9% higher to $3.88 a bushel bouncing from a fresh contract low of $3.80 a bushel reached earlier.

The old crop September contract, which will take over in the next session as the spot lot after today's expiry of the July lot, closed up 0.9% at $3.81 a bushel.

(Even so, it will be quite a stretch in the next session to avoid it setting a four-year low for a spot contract.)

'Well below $3.50 a bushel'

Not that there was too much bullish talk around.

Indeed, the downbeat comment on corn and soybean prices after Friday's upgrades by the US Department of Agriculture to its estimates for domestic, and world, stocks at the close of 2014-15 that maybe that in itself is a contrary indicator.

"After Friday's report traders are now focused on the $3.50-a-bushel level for corn and soybeans below $10.00 a bushel," Allendale said.

"Many are thinking ending stocks will go up once the USDA makes yield adjustments."

Thinking of which, Darrell Holaday at Country Futures said that "there is a lot of talk about corn yields moving above 170 bushels an acre as conditions throughout the US are simply too good with very little geographic area indicating any significant problems.

"Could this be the year that management, genetics and weather come together to produce a national yield above 175 and takes a shot at 180 bushels an acre?

"If so, the downside in corn futures is well below the current price levels and well below $3.50 a bushel."

'Weather continues to be excellent'

As an extra slight negative, US corn exports last week came in at 926,329 tonnes, not a bad figure but below the 1.26m tonnes the week before.

Furthermore, there are data later expected to show the US corn crop still in top condition.

"The weather continues to be excellent for crop development," Citigroup's Sterling Smith said.

And data on hedge fund positioning surprised by showing a small increase in their net long in corn futures and options last week, provoking concerns that liquidation still has a lot more scope.

The extra length appears a "negative factor", Benson Quinn Commodities terming it "additional length the trade wasn't fully expecting", and perhaps reflecting spreading between corn and soybean futures.

'Finding some buying'

Still, as Macquarie has pointed out, the dynamics for minimum crop pricing might have changed with rising production costs.

And that has encouraged some investors to take profits rather than hang on for yet lower lower prices, for now.

"The market is finding some buying at these levels as the new selling has been tempered at these price levels and the buying is primarily short covering," Mr Holaday said.

'Dreaded fusarium'

There was something of the same going on in wheat futures too, in which hedge funds have a substantial net short already in Chicago.

It was notable that Chicago soft red winter wheat for September, in jumping 2.2% to $5.37 a bushel, far outperformed Kansas City hard red winter wheat for September, in which hedge funds still have a net long position, and which closed up 1.6% at $6.46 a bushel.

US wheat exports last week, as measured by cargo inspections, were soft, at 377,520 tonnes, down from 470,372 tonnes the previous week.

Still, the weather is not proving so perfect for the grain as for corn.

"Damp conditions have introduced the potential for the dreaded fusarium," a fungal disease, Benson Quinn Commodities noted.

'Sabres continue to rattle'

The broker added that "wet weather has hampered harvest in eastern Colorado and Nebraska", and that "wet weather is also plaguing harvest in the European Union with the some quality concerns emerging".

Furthermore, "sabres continue to rattle in eastern Ukraine, which will gain attention from the trade", with a Ukrainian military transport aircraft short down, potentially by a missile fired from Russia.

This after a rebel attack near the Russian border on Friday in which 19 government soldiers were killed.

European prices

Heightened Ukraine tensions earlier this year contributed to the rally in wheat prices also fuelled by US drought.

And it has attracted the notice of observers that has spoken to that Ukraine has trod a low-profile path on high profile export orders of late, unlike its Black Sea peer Romania.

Still, nearer to Ukraine, in Paris, milling wheat failed to shine, closing down 1.0% at E178.75 a tonne for November delivery, the weakest close for a spot contract since November 2011.

London wheat for November ended down 0.8% at a four-year low of £129.70 a tonne,

These closes occurred before the best of the rally in Chicago wheat futures, which could be reflected in trade tomorrow.

'Weighed heavily'

Oilseed markets had the negative to negotiate of a tumble in palm oil futures, which closed down 2.0% at 2,298 ringgit a tonne in Kuala Lumpur, the lowest close since September.

"Fallout from Friday's USDA Wasde report weighed heavily on prices as this portends to a large vegetable oil supply in coming months," Citigroup's Sterling Smith said.

Still, soybeans themselves managed some gains in Chicago, like the grains, especially the November contract, which added 1.1% to $10.86 a bushel.

A little support came from news of an Argentine truckers' strike on July 21 for an indefinite period, speaking of disruptions in shipments from that geography.

However, US exports were decent, at 115,280 tonnes, up from 92,698 tonnes last week, and it was also noted that hedge funds have already sold down a stacks of soybean futures and options, nearly turning, unusually, net short in the oilseed.

'Roasters more interested in buying'

Among soft commodities, cocoa fell 0.2% to $3,083 a tonne in New York for September delivery, undermined by data showing a 9.9% drop in Malaysia's grind in the second quarter.

That said, Lindt & Sprungli, unveiling a US confectionery acquisition, claimed double-digit organic growth in chocolate sales in North America, raising some hopes for more upbeat industry data from North America later this week.

Arabica coffee closed up 1.8% at 164.35 cents a pound amid bargain hunting, with not much news around yet to decide more on the exact extent of the drought-hit Brazilian harvest.

At Price Futures, Jack Scoville said: "Roasters seem more interested in buying, and they might have to keep buying more from Brazil."

In London, robusta coffee for September closed up 1.3% at $2,023 a tonne, reclaiming the $2,000-a-tonne mark and cutting its discount to arabica coffee to a five-month low of 66 cents a pound.

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