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Evening markets: corn fails at the last, after wheat falters

Corn futures failed at the last gasp.

The best-traded December contract looked like it was about to break its run of losing calendar months stretching back to May.

But the contract, after a decent performance in the overnight session, faltered in the day one to close at $3.64 a bushel, down 1.2% on the day and 2.25 cents for August.

It looks like funds lost their inhibitions over taking on a bit of risk on the last trading day of the month, typically seen as a period of position closing as investors tidy up positions and withdraw cash.

'Scoring records'

Sure, it is possible the weekend could bring a forecast of frost for the US, which would be a price supportive factor.

But the current outlook appears more favourable.

"Weather leans negative [for prices] with warmer temperatures next week  - excellent for final kernel/pod fill an and ongoing active Midwest precipitation pattern, including weekend relief for dry portions of northern Delta," said Richard Feltes at RJ O'Brien.

Bears could also take comfort in the strong US harvest so far.

"Delta corn yields are scoring records - upwards of 225 bushels per acre are being reported," said broker US Commodities.

Ukraine tensions

Furthermore, the International Grains Council upgraded its estimate for world corn stocks as of the close of 2014-15 to a 27-year high.

And wheat, the main prop of the grains market suffered a setback, despite continued unrest in Ukraine, and raised tensions between Kiev and Moscow.

With Russia and Ukraine both major exporters of competitively-priced wheat, the wheat market has been something of a barometer of regional tensions.

The dispute kept simmering on Friday, with Nato accusing Russia of a "blatant violation" of Ukraine's sovereignty and of engaging in direct military operations to support pro-Russian rebels.

Seven Nato states are also creating a new joint expeditionary force of at least 10,000 personnel to boost the organisation's muscle in response to Russian aggression in Ukraine.

Meanwhile, Mariupol, site of an important grains port, dug in against the approach of pro-Russian rebels.

'French farce'

Still, Minneapolis-based Benson Quinn Commodities said that "minor escalations in the Ukraine/Russia conflict ahead of the weekend tends to die down over the weekend".

In the UK, David Sheppard, managing director at Gleadell, noted that while markets have often seen end-of-week rises thanks to Ukraine tensions, "to date the market gives it back by Monday".

Certainly, Chicago wheat closed down 1.4% at $5.63 a bushel for December delivery, staying just above its 50-day moving average, and recording a small price gain for the month.

And in Paris, milling wheat for November closed down 0.4% at E172.50 a tonne, little phased by the talk of a quality-damaged German crop.

That said, is Paris [Matif] milling wheat really milling wheat, given the loose specifications for delivery?

"With the spec only being feed wheat at best many are questioning what exactly the Matif contract is or stands for anymore other than some sort of French farce," Mr Sheppard said.

'High levels of vomitoxin'

In fact, quality is becoming increasingly an issue for the US spring wheat crop too, with the rains protecting row crop yields a negative for spring wheat harvest progress and quality.

Allendale reported that its North Dakota clients "finding high levels of deoxynivalenol", aka Don, or vomitoxin, "in the harvested spring wheat crop.

"Most early planted spring wheat is coming in at 3-7 parts per million," at a time when "many elevators are discounting about 40-60 cents a bushel for a Don of 4-5ppm".

Furthermore, there is "also some concern about wheat sprouting in the head with the weather we are having".

'Sound crop'

This after a US soft red winter wheat scoring high on Don too, although it has to be said that US Wheat Associates took a less downbeat view of the crop, despite acknowledging that "heavy rainfall and high humidity halted the small grain harvest in some areas where it had started".

US Wheat Associates, which promotes US wheat exports, said that average protein so far on US hard red spring wheat was in line with last year, at 13.6%, and test weight, at 61.5 pounds per bushel (80.9 kilogrammes per hectolitre), down from last year's final average of 62.3 lb/bu (82.2 kg/hl) but not a disaster.

Furthermore, the "falling number average is over 400 seconds indicating a sound crop at this time".

Minneapolis spring wheat for December dropped, if by a modest 0.4% to $6.29 a bushel for December, up 3.5 cents for the month.

'Routine business'

Soybeans fell too, by 0.4% to $10.24 a bushel for November delivery, just above the contract's lowest ever close.

"Reports from the Delta tout huge 80-90+ bushels-per-acre yields with moistures of 13.5%-14.5%," CHS Hedging said. 

"The US Department of Agriculture is carrying the Louisiana yield at 50 bushels per acre and Mississippi at 48 bushels per acre.

While the USDA unveiled the export sale of 123,000 tonnes of soybeans to China, this was dismissed by RJ O'Brien's Richard Feltes as "routine" business.

Cocoa drops

Among soft commodities, cocoa for December closed up just $1 a tonne in New York at $3,229 a tonne, retreating from an intraday high of at $3,281 a tonne, after the International Cocoa Organization ditched ideas of a world production deficit this season.

Instead, the world was in for a 40,000-tonne surplus, the ICCO said, noting unexpectedly high West African output.

London's December lot dropped 0.8% to £2,017.

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