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Evening markets: corn dips despite US data. But coffee rises

If grain prices had been unexpectedly buoyant in the run-up to the Wasde report, they were more muted afterwards than many investors expected.

OK, that was not so true of wheat, which had good reason to tumble by 1.8% to $6.69 a bushel in Chicago for May delivery.

Although there was some support from delayed official US crop condition data overnight - which showed just 35% of winter wheat seedlings in "good" or "excellent" health, even worse than last year the Wasde offered little to support prices of the grain.

The report, the US Department of Agriculture's flagship monthly briefing on world crop supply and demand, raised the estimate for world supplies at the end of 2013-14 by 2.9m tonnes to 186.7m tonnes, rather than making the small downgrade that traders had forecast.

 The USDA forecast for domestic stocks was raised in line with expectations, by 25m bushels to 583m bushels (15.9m tonnes).

 "There was nothing in today's report for wheat bulls," said Richard Feltes at RJ O'Brien.

'Model runs have turned wetter'

Furthermore, there is some hope of rain for the drought-hit southern Plains at the heart of the poor winter crop condition.

"The morning and midday GFS model runs have turned wetter for the Plains and Midwest and, yes, wetter in the hard red winter wheat areas," said Darrell Holaday at Country Futures.

"This will be interesting to watch as the weekend approaches," with forecasts having a habit of u-turns. noted that the European weather model is "drier over east Texas, east Oklahoma, and east Kansas" in the short-term outlook, and shows no rain over the southern Plains in the six-to-10 day outlook.

It was notable that Kansas City-traded hard red winter wheat - as grown in the southern Plains, and less of a fund favourite too than its Chicago soft red winter wheat peer fell by a more modest 1.2% to $7.32 a bushel.

Corn reverses

But corn fell despite some bullish numbers in the Wasde, with the USDA cutting its estimate for domestic stocks at the close of 2013-14 by 125m bushels, more than the market had expected.

Although this initially sent May futures to $5.19 a bushel, the highest for a spot lot in seven months, the contract ended down 0.9% at $5.02 a bushel, a retreat for which various explanations were offered.

One was disappointment that the USDA stuck by expectations for feed use, despite the surprisingly large usage implied by domestic stocks data last week, and for consumption by ethanol plants too, despite their strong margins.

"Both could be revised higher on upcoming crop reports," RJ O'Brien's Mr Feltes said.

'Already priced in'

In fact, weekly ethanol data were soft, with weekly US production falling 26,000 barrels a day last week to 38,000 barrels a day.

And US inventories rose nonetheless, by 532,000 barrels to 16.41m barrels, helped by strong imports, which soared to 38,000 barrels a day last week from 11,000 barrels a day the week before, and from zero for the previous five months.

Profit-taking was widely seen as a setback too, with some idea that futures are already fairly valued.

"Today's ending stock number implies $5.10 a bushel for nearby futures," said Rich Nelson, chief strategist at Allendale.

"In other words, the market may have already priced in [the stocks downgrade]."

New crop December corn underperformed, falling 1.4% to $5.05 a bushel, although the extent of the decline was in part down to a closing price to the last session deemed artificially high, and a result of the temporary glitch to CME Group's Globex electronic trading system.

Soybean squeeze

It was left to soybeans to keep Chicago bulls' happy, rising 0.9% for May to $14.95 a bushel, although even this was well below the intraday high of $15.12 a bushel, again with profit-taking seen at work.

The spurt followed a cut of 10m bushels to 135m bushels in the USDA forecast for domestic soybean stocks a small change on paper but one which exceeded expectations and implies very squeezed supplies.

Indeed, as a proportion of use, they match the tightest on records going back 50 years.

Soymeal for May fell back too, closing up 0.8% at $478.10 a short ton, but below the four-month high of $490.90 a short ton set earlier, after the USDA raised its estimate for US exports by 100,000 short tons, but cut ideas of domestic use.

Mr Feltes said: "Domestic soymeal users will be forced to lean on more use of distillers' grains," the rival protein feed source manufactured as a byproduct by corn ethanol plants.

Lowest stocks since 1951

Among soft commodities, cotton futures followed something of the same path as grains, suffering a late sell-down to end 1.5% lower at 90.44 cents a pound in New York for May delivery.

The USDA also lowered its forecast for domestic stocks at the close of 2013-14 by 300,000 bales to 2.5m bales a 62-year low.

However, this downgrade had been largely expected, after surprise ginnings data released two weeks ago.

Meanwhile, the USDA also nudged its estimate for world stocks higher, by 170,000 bales to 96.9m bales, thanks to increases to forecasts for Brazil and China.

Coffee rises

Cocoa was mixed, falling by 0.6% to $3,011 a tonne in New York for May delivery, but rising by 0.3% to £1,887 a tonne in London for July, as traders await demand European data due on Thursday.

An increase of some 3% in the European grind for the January-to-March quarter is expected.

But arabica coffee rebounded from early losses to close up 1.7% at 199.85 cents a pound for May, after Parana's rural economy department, Deral, forecasting a sharp drop in the Brazilian state's coffee crop this year, thanks to the impact of frost last year and the 2014 drought.

However, further gains may take some buying pressure to achieve, with traders reporting significant selling pressure when prices have strayed above 200 cents a pound.

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