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Evening markets: Crimea, US and Egypt combine to lift wheat

Bull markets need feeding, the saying goes.

And they got their ration, in grains and oilseeds at least, on Tuesday, when soybean and wheat prices jumped 2% in Chicago, with gains in corn futures not too far behind.

The further decline in US winter wheat condition, reported by US Department of Agriculture scouts overnight, was one supportive factor, especially given the prospect that more of the wind, cold and dryness that has plagued seedlings in the central and southern Plains is on the way.

"Weather leans positive [for prices] with a slightly colder outlook next week and confirmation of ongoing dryness across more than half the US hard red winter wheat belt," Richard Feltes at RJ O'Brien said.

A "red flag" warning from the US National Weather Service of "very high to extreme" concerns over wildfires in western Oklahoma and parts of Texas only reinforced the message.

Egyptian purchase

A further boost for US wheat came when it scooped part of a 175,000-tonne order by Egypt's Gasc grain authority, with Romanian and Russian supplies also featuring.

This victory came despite the handicap to US wheat of the extra shipping charges, of perhaps $16 a tonne, for getting it across the Atlantic to Egypt, rather than just from the Black Sea, as with Romania and Russia.

And it indicated too the freeing up of supplies after the logistical hurdles posed by cold weather in recent weeks.

"It is that that has been an issue in getting competitively priced grain out of the US," one European commentator told

In further signs of demand, even at current prices up more than 20% from late January levels, Lebanon bought 25,000 tonnes of milling wheat from Kazakhstan for arrival by April 7, Japan is tendering for 119,000 tonnes of milling wheat, and Tunisia is out for 42,000 tonnes of optional origin durum for shipment in April-May.

Crimea casualty

A third support came in the form of an uptick in the Ukraine tensions, after an unnamed officer was killed in an attack by pro-Russian forces on a military base in Crimea.

"These markets are very difficult because of the political dimension, which is so difficult to anticipate," a European grain trader said.

"A person gets killed in Crimea, and the markets are up and away."

The Ukraine situation is viewed as important to markets because of the country's status as a major wheat exporter, the third-ranked corn shipper, and a big seller of barley too of which about one-third of the Ukraine winter crop is grown in Crimea.

Spring sowings progress

Talk differs hugely about the actual impact of the crisis on Ukraine's grain industry.

Although there is agreement that actual shipments of existing orders have not been disrupted too much, some such as the Ukraine Agribusiness Club say that new purchases have dried up and others that spring sowings are badly behind because of a lack of finance for farmers.

In fact, Ukraine said that its spring sowings, mainly barley and wheat up to now, have reached 693,000 hectares, or 24% of the expected planted area.

"Even if the situation in Ukraine remains uncertain, producers are working to advance their spring work," was Agritel's take, adding that official data showed that "the proportion of cultures considered in good conditions is confirmed up to 93% for winter grains and up to 94% for rapeseed".

Also, "respectively 82 % and 91 % area in winter grains and rapeseed have now received a first passage of nitrogen fertilizers".

'Aggressive basis'

Still, with the bulls getting enough to feed on, wheat for May closed up 2.7% at $6.92 a bushel, the best finish for a nearest-but-one contract since late October.

In Europe, London wheat for May added 1.2% to £167.965 a tonne, but in Paris gains were more limited, with the May wheat contract ending up 0.5% at E207.75 a tonne.

There was some disappointment at Gasc's failure to choose any French wheat, although it was close in contention, not far above the winning Romanian offer, but with higher shipping costs.

Indeed, when stripped of some premiums for dealing with Egypt, the French offer showed an "aggressive basis", FCStone said, noting that basis in both France and Germany is below average levels for this time of year.

Central European drought

One topic that may gain more attention too is growing talk of dryness in Central Europe.

Gail Martell at Martell Crop Projections said that the "most serious drought is in Bayern, southern Germany, where winter rainfall was less than 50% of average.

"Troublesome drought has continued in March," and indeed "seems to be spreading into Poland another important wheat-producing country", the third ranked in the European Union in grains output overall.

"Central Europe could definitely do with a bit more rain once plantings are over," the European commentator told

Big report ahead

Back in Chicago, corn closed up 1.5% at $4.86 a bushel for May, lifted itself by the Ukraine jitters, and by wheat.

The relationship between the two grains will come into sharper focus in the quarterly US grain stocks report on March 31, which is taking an increasing place in market thinking.

There were signs of demand for corn too, with South Korea's Nonghyup Feed purchasing 193,000 tonnes of the grain at tender, sourced from the US and South America.

And the cold US weather outlook is hardly helpful for US farmers seeking a warm-up in soil temperatures ahead of spring plantings, to encourage germination.

'Sellers waiting on the sidelines'

Soybeans, for which Ukraine is not such a direct influence, added 1.9% to $14.18 a bushel for May nonetheless, helped by yet another day without evidence of Chinese cancellations of orders of US cargoes, as has been expected with the South American harvest online in earnest and with supplies apparently backing up in Chinese ports.

"Support continues to be generated by the need to ration demand and the lack of adequate export sales cancellations," Jefferies Bache said.

"There continues to be discussion about 500,000-1.0m tonnes of sales begin cancelled thus far, with much more to follow.

"However, the lack of confirmation of larger volumes has prospective sellers waiting on the sidelines, not wanting to initiate positions in case cancellations fall short of expectations."

'Bearish impact'

That said, not every comment on soybeans was bullish.

Oil World warned that "a significant slowing-down of the year-on-year growth in Chinese soybean imports in the April-June quarter could have a bearish impact on soybean prices, unless any new export problems arise in South America".

However, bulls had other reasons too for backing beans.

Richard Feltes at RJ O' Brien said: "The soybean market regains its footing on the heels of improving crush margins, slow farm sales, firming processor bids, an uptick in South American soymeal premiums, a dearth of Argentine farm sales," besides the "absence of any sales cancellations today".

Evidence for decent US crush margins came in processing data on Monday, showing the February crush at 141.6m bushels, above market expectations, and will hardly have been hurt by a 2.1% gain to $455.80 a short ton in May soymeal futures.

And, from technical perspective, April soybean options expire on Friday with the largest open interest at the strike price of $14.20 a bushel, a level that futures may tend towards.

Sugar sweetens

In New York, soft commodities had a better day too, although not a banner one, with the drop in arabica coffee prices in the last session switching off producer selling, and helping May futures edge 0.1% higher to 191.55 cents a pound in this one.

Although much-needed rains have been forecast for Brazilian coffee growing areas, there are doubts as to how much will arrive and how much good it will do, given the extent of damage already to trees and cherry production.

Remember that Volcafe has cut its 2014-15 global coffee ending stocks estimate to a deficit of 6.5m bags, the first in five years, from a December projection of a 5.3m-bag surplus.

Raw sugar for May added 0.5% to 17.14 cents a pound, helped by the revival coffee, given the Brazil's cane crop has also been affected by drought, if against a backdrop of concerns of a seasonal sell-off.

Chocolate drops

It was actually cocoa which fared worse, dropping 0.5% from last night's two-year closing high to end at $3,014 a tonne for May delivery.

Still, cocoa remains supported by ideas of a second successive world production deficit in 2013-14, while demand is viewed as buoyant.

Lindt & Sprungli reported a rise of 8% in chocolate sales last year, beating a 6% target, which it expects to hit in 2014.

Sugar price to revive - after seasonal spring dip
Deteriorating US wheat faces further cold, dryness
Egypt finds cheap US wheat, but no Ukraine offers
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