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Cotton evades ag sell-off, but not wheat, corn, coffee...

If any agricultural commodity investors were hoping for month beginning to bring buying after all, they were left disappointed.

Tuesday, that great day of turnarounds in Chicago, brought no respite to wheat futures, which dropped 1.3% to $6.12 a bushel in late deals for July delivery, its 18th lower close in 19 sessions, besides setting a contract low in London and an eight-month closing low in Paris.

And while it did bring turnarounds in corn and soybeans, that only meant retreats, after some gains in the last session.

Brazil frost

Soft commodities did a little better, with raw sugar recording a marginal increase, adding 0.01 cent to 17.19 cents a pound for July, with traders reluctant to let the sweetener slip below the bottom of its recent trading range, especially with talk around of frost in Brazil.

Some parts of Parana in southern Brazil recorded freezing temperatures overnight, with further cold expected, although it is seen by consultancy Somar as more of a danger to corn than sugar cane, or coffee.

Indeed, arabica coffee for July fell 0.7% to 171.15 cents a pound, with the balance of doubt over Brazil's production, and potential losses to early-2014 drought, swinging towards more optimistic forecasts, above 50m bags.

That said, Citigroup stuck with a crop estimate "in the sub-45m bag area", while food and coffee group JM Smucker revealed a potential contrarian market signal in raising its coffee prices.

'Dry or mostly dry'

Cotton was a little more convincing for soft commodity for bulls, adding 1.0% to 87.36 cents a pound for July delivery, although the new crop December lot only gained 0.1% to 78.34 cents a pound.

The fibre was helped by ideas of dryness ahead in Texas, the top US producing state, which offset the impact of a downgrade by the International Cotton Advisory Committee to its forecasts for prices in 2014-15.

World Weather said that in Texas while "some cotton, corn and sorghum areas from west Texas into the Blacklands may get some moisture, the remainder of the coming 10 days will be dry or mostly dry in much of the state with only a few random showers periodically

"Temperatures will be warm enough to counter the random showers with strong daily evaporation."

'Record grain production year'

Back in Chicago, parts of wheat's problem, and the reluctance by funds to stop selling despite futures being hugely "oversold" technically, is the time of year, with the harvest beginning in the likes of the US and China, where talk is of bumper yields.

"China's agriculture ministry is projecting another record grain production year," CHS Hedging noted.

Harvest time brings pressure on prices from ramped up supplies, besides the withdrawal of the last vestiges of weather premium.

Indeed, in terms of supplies, "other than US hard red winter wheat's production problems," ie well documented losses to drought, "the wheat market remains void of any new bullish input at the moment", CHS Hedging said.

"Demand continues to find plenty of supply around the world."

'Pressure continues to mount'

There remain some alarms over dryness in Russia, "but weather models indicating moisture moving into that region later this weekend and next week," Darrell Holaday at Country Futures said.

Indeed, "the pressure in the wheat market continues to mount with continued price-cutting outside of the US putting a lot of pressure on the US wheat futures," he said.

"Europe seems to be the leader in lowering values as there is optimism about the new crop in Europe and there is a burdensome old crop supply."

In fact, Paris wheat for November nudged 0.4% lower to E189.75 a tonne, an eight-month low for a spot contract.

London wheat for November set a contract low of £141.75 a tonne before regaining some ground to end at £142.05 a tonne, down 0.4%, undermined too by expectations of an early and strong UK harvest.

'Stellar crop'

But wheat futures were also dragged lower by weakness in other grains and oilseeds, after US Department of Agriculture data overnight confirmed the strong early condition of US corn, besides strong progress in sowings of soybeans too.

The 76% of US corn rated "good" or "excellent" as of Sunday, the best rating bar one in 20 years, "has the trade talking now about potential for the crop to achieve an above-trend-line yield, with July pollination the only impediment seen at the moment for a stellar crop", Benson Quinn Commodities said.

And weather bodes well for other crops too.

"Soybean and spring wheat ratings will be reported for the first time next Monday with market expectations for similarly high ratings," the broker added.

"At this time weather forecasts for the next 10 days support this supposition with waves of rain seen moving from the central and western plains across the Corn Belt with amounts from 1.5-3.0 inches locally by later this week."

Corn closed down 1.6% at $4.58 a bushel in Chicago for July delivery, and by 0.9% to $4.54 a bushel for the new crop December lot.

Rapid sowings

Soybeans, meanwhile, dropped 1.3% to $14.81 a bushel.

The USDA crop progress data overnight showed US plantings of the oilseed proceeding strongly, with 78% completed.

"That started the selling in the overnight trade and it has gathered momentum through the session today," Darrell Futures' Mr Holaday said.

In China, the weekly auction of soybeans from the state reserves sold 312,905 tonnes of the oilseed, 72% of the volume offered, and taking to 1.08m tonnes the total volume sold so far at the events.

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