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Evening markets: corn leads grains revival. Softs struggle

Grain markets returned to the front foot, as the one-way talk about lower prices ahead turned into more of a debate, but the mood in soft commodities was more muted.

December corn futures, having traded lower for nine successive sessions up to Friday, produced their second up day in three so far this week, adding 1.3% to $3.86 a bushel.

It also avoided setting an intraday contract low for the first time this month.

The old crop September contract gained 1.1% to $3.78 a bushel.

'Uncertainty around the weather'

It was not that there was a huge improvement in the fundamental news, although changes in the weather forecast, while for the better in terms of adding wetness to the Midwest outlook, were unsettling in their changeability.

The midday run of the GFS model "moved more in the direction of the EU model, with cooler temperatures and more moisture in the Plains and Midwest", said Darrell Holaday at Country Futures.

"Given the sharp sell-off of the last three weeks, this uncertainty around the weather forecast has prompted additional short-covering."

Export orders

What was different is a growing pressure that prices may have reached some kind of value levels, an idea that gained some traction on talk of a succession of grain and oilseed import orders.

In corn, the US Department of Agriculture announced the export sale of 210,448 tonnes to "unknown destinations" for 2014-15 delivery.

A group of Israeli buyers also bought 108,000 tonnes of corn, plus 50,000 tonnes of feed wheat, although deemed likely sourced from the Black Sea.

The USDA also announced the sale of 120,000 tonnes of US soybeans to China for 2013-14 delivery, plus 240,000 tonnes to "unknown destinations" for 2014-15.

There was other export activity in wheat too, with Algeria's state grains agency, OAIC, buying 810,000 tonnes of the grain, probably of French origin, for $268-269.50 a tonne and tendering for barley too.

'Markets are basing'

Sticking on demand, weekly US ethanol data were helpful for prices too, showing production up 16,000 barrels a day at an elevated 943,000 barrels a day last week, while stocks fell 341,000 barrels to 17.95m barrels.

And there was the technical point, highlighted earlier, that corn prices often find a range between mid-July and mid-August.

It all gave some weight to ideas that losses may not be so easy to come by, with Commerzbank on Wednesday forecasting resilience in soybeans, and some recoveries ahead for Chicago corn and wheat futures (but not Paris wheat).

Richard Feltes at RJ O'Brien said: "Ag markets are basing short term. It may take confirmation of the next soaking rain to punch out new price lows."

Benson Quinn Commodities said: "Markets remain oversold and are hinting at forming a consolidation range."

'Trend is still solidly down'

Not, it has to be said, that there are thoughts of price recoveries proving that dramatic, and plenty of bearish talk remains.

"The trend is still solidly down," Country Futures' Darrell Holaday said.

"Why the bounce in grains? The answer is that they have moved straight down for 3 weeks and markets dont move straight up or down without correction."

Citigroup's Sterling Smith said that "while the market, for the moment, may have overshot to the downside and may be able to garner some support", price strength "is transitory and can evaporate as quickly as it appeared".

After all farmers are behind on crop sales, meaning that "the market should find increasing resistance as prices move higher".


Still, there was enough buying around to return November soybeans back above $11.00 a bushel, to $11.02 a bushel, a gain of 1.5%.

Earlier, the contract hit $11.07 a bushel, close to its 10-day moving average, putting back on the agenda a group of chart signals that have been irrelevant as prices have ploughed further and further below the main lines.

Markets appeared intrigued by the further purchase of old-crop soybeans by China, with talk that the cargoes had been switched from South American origin, potentially an indication that US prices are punching hard in competitiveness terms.

But after the soft US crush data on Tuesday, and the bearish changes on Friday to the USDA's estimates for the domestic balance sheet in 2013-14, the boost to the old crop August lot was limited, with it ending up 0.6% at $11.87 a bushel.

Russia upgrades

Nonetheless, the laggard was actually wheat, which for September delivery nudged only 0.25 cents higher to $5.38 a bushel, despite Commerzbank's idea that prices of $6.00 a bushel lie ahead.

US export news for the grain is not so enthralling than for corn and soybeans, with France apparently scooping the Algeria order, for instance, (as might be expected, given proximity and historical ties) and Russia fighting hard to win an Iraqi tender.

Furthermore, Russia looks like having more to sell than initially expected, with Russia's agriculture ministry lifting by 3m tonnes to 100m tonnes, or more, its forecast for the country's grains harvest this year.

While farm ministry estimates are taken by markets with a pinch of salt, respected consultancies upgraded their forecasts too.

Ikar raised its estimate by 2m tonnes to 98m tonnes, while SovEcon upgraded its forecast to 92m-93m tonnes, from about 89m tonnes.

So far, Russian farmers have harvested 20.1m tonnes of grains, bunker weight, from 12% of planted area, at a yield of 3.55 tonnes per hectare, according to farm ministry data.

At year ago, growers had reaped 25.3m tonnes of grains at yields of 3.08 tonnes per hectare.

Milling vs feed

Wheat fared better in Paris, adding 1.1% to E179.00 a tonne for November delivery, amid continued concerns over the impact of late rains on the quality, if not quantity, of the European Union harvest.

"There is still some chatter about the slow pace of harvest progress in northern EU as wet conditions have caused delays," Minneapolis-based Benson Quinn Commodities said.

"The bigger issue would be wet conditions continuing and potential quality issues."

Agritel on Tuesday noted that "operators remain worried about crop quality because of latest rains registered around France and Germany.

"Indeed, germinated wheat and barley are signalled on several production areas."

It was notable that prices of feed wheat, which might become more plentiful if rain causes downgrades, added a more modest 0.3% to £129.25 a tonne in London.

'Reports of poor production'

Among soft commodities, arabica coffee futures recovered 0.3% to 162.50 cents a pound for September delivery, putting a little further ground between them and the intraday low of 159.25 cents a pound, the weakest in nearly five months, reached in the last session.

"Reports of poor production continue to arrive with regularity from major Brazilian production areas," Sterling Smith at Citigroup said.

That said "the lack of a frost threat and agreeable harvest weather is keeping the bulls under pressure".

An extra factor in their favour was a downgrade of some 23,000 tonnes to 195,000 tonnes in the estimate for the Peruvian harvest, with the cut attributed to losses to the roya fungus.

'Talk of bigger Colombian offers'

At Price Futures Group, Jack Scoville flagged "talk of bigger Colombian offers this year as trees replanted over the last couple of years start to produce.

However, "roasters seem more interested in buying, and they might have to keep buying more from Brazil or Colombia as robusta offers overall seem down right now", after a poor Indonesian crop.

Nonetheless, robusta coffee for September traded down 0.6% at $2,009 a tonne in London.

But that was better that London cocoa, which ended down 0.9% at £1,912 a tonne for September delivery, while its New York peer lost 1.4% to $3,062 a tonne.

Prices were undermined by Hershey's announcement of price rises, a factor seen triggering similar increases by rivals, and curtailing growth in cocoa demand.

Morning markets: grain futures stage revival. Can it last?
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