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Evening markets: grain market witnesses Groundhog Day

Is it Groundhog Day in Chicago?

Just as in the last session, soybean futures found fresh highs, while wheat struggled and corn stood undecided in the middle.

And investors had some fundamental cause for their positioning, besides some technical factors, with soybeans' close above $15.00 a bushel in the last session seen as something of a coup by chartists.

US soybean export sales of 164,400 tonnes last week, reported by the US Department of Agriculture were, while hardly much to write home about under most circumstances, noteworthy when the country is already looking at such as tight balance sheet.

"The export sales is not a wow number, but it is when sales and shipments are already 5% over the entire year's projection," Darrell Holaday at Country Futures said.

The US has now sold, or already exported, nearly 50m bushels (1.3m tonnes) more soybeans for 2013-14, ending in August, than the USDA has forecast for the season, and it is not as if there is much of the oilseed hanging around elsewhere in the country.

'Near-term pipeline is thinning'

Sure, there are soybeans on their way to the US from Brazil, where RJ O'Brien intelligence reported that 1m tonnes is either heading north or waiting to be loaded.

However, that is equivalent to less than 1 week's US needs, and has not proved enough yet to prevent American crushers paying up for supplies.

CHS Hedging said that while "talk continues in the trade about Brazilian soybeans being loaded destined for US ports, currently there is not enough import business to justify the 90m bushels that the USDA is using on their balance sheets".

RJ O'Brien's Richard Feltes said: "The trade is still sensitive to the old crop US soybean balance table

"The bear news on potential record old crop soybean imports is in the market, while the eastern soybean basis is sending the message that the near-term pipeline is thinning."

China talk

As an extra support, the news on China continues to improve, with the country confirmed on Thursday, buying 120,000 tonnes of new crop soybeans, in addition to 230,500 tonnes revealed in the weekly export sales report.

"There has been talk that China continues to show interest in soybeans," Benson Quinn Commodities said.

Jefferies Bache also clocked "optimism about demand from China", highlighting "increased soymeal demand" there, even if much of its soybean supplies are believed to be being sourced from Brazil.

'Lower prices attract demand'

In fact, the market for soymeal is proving robust too, with US export sales of 186,000 tonnes for 2013-14, and 164,000 tonnes for next season, well ahead of expectations of at best 200,000 tonnes.

"Slightly lower prices attract demand for both soymeal and soybeans, and higher prices have done little to back said demand off," Benson Quinn Commodities said.

Soymeal for July closed up 0.5% at $500.50 a short ton, a fresh contract closing high, if well below the $508.00 a short ton reached earlier.

Soybeans themselves for July added 0.9% to $15.18 a bushel.

Soybeans vs corn

Another echo from the last session was that the July soybean contract saw a bit of a late session rally, if a smaller one.

Also, new crop November soybeans managed a fresh 11-month closing high, ending up 1.4% at 12.70 a bushel.

That took its ratio to new crop December corn futures to a fresh top, at 2.68:1, even though the grain contract performed better this time in adding 0.4% to $4.73 a bushel.

Still, December corn remained below its 100-day and 200-day moving averages, which it tried earlier to break through, with only temporary success.

'Favourable weather outlook'

Corn for July at least managed to stay above its 200-day moving average in ending up 0.5% at $4.77 a bushel, and nearly retook its 100-day moving average.

Mr Feltes flagged some nerves over the "possibility that US old crop corn stocks could tighten further amid brisk old crop corn export sales".

The US actually sold 507,900 tonnes of corn last week for 2013-14, a figure up 48% week on week, if in line with the recent average.

However, decent northern US sowing weather continues to keep a lid on prices,

"The favourable weather outlook for planting isn't giving bulls much of a reason to get excited," CHS Hedging said.

Rains on the Plains

Still, weather was an even bigger factor in the wheat market, with the drier weather in the US north, where damp had delayed plantings, only one of a number of factors on traders' radar.

The southern Plains is also expecting more rain, after falls overnight that, in Amarillo, Texas, may have reached 2 inches, according to Commodity Weather Group.

"US hard red winter wheat country and West Texas drought areas are still slated to get needed rain late this week through early next week," the weather service said, adding that "slow moving storm system will produce daily rainfall favouring the south western Plains".

"Rain totals in west Texas and areas north and east into extreme southern Kansas and central Oklahoma may range from 1.00-3.00 inches, with local totals over 4.00 inches."

'Forecasts show improvement'

Of course, there are questions about how much good this rains will do for wheat crops beyind stabilise them, given that they are already well mature.

But there is still seen as time to help crops in some parts of Russia where dryness is also an issue.

"Weather forecasts show improvement for important wheat growing areas of Russia with rains probable in the next 6-10 days," CHS said.

MDA took a more reassuring stance from a grower's perspective, saying that "rains are still in the outlook for Volga Valley next week," rainfall which would "begin to replenish moisture and improve crop condition".

'Uncompetitive nature'

The forecast gave some sort of credibility to a forecast from Russia's agriculture minister of a 100m-tonne domestic grains harvest, a figure above that from most private analysts.

And as an extra setback for wheat bulls, Argentina's farm ministry, in its first forecast for domestic wheat sowings, pegged them at 4.5m hectares, 200,000 hectares more than the Buenos Aires grans exchange forecast last week.

Meanwhile, although there is growing demand around from high profile buyers, with Jordan tendering for 100,000 tonnes and Tunisia for 50,000 tonnes, on top of tenders already in progress from the likes of Algeria, for durum, US supplies may still be too highly priced to comete.

"Iraq's purchase of Russian wheat [earlier this week] at a drastic discount to US offers highlights the uncompetitive nature of North American wheat offers," Benson Quinn Commodities said.

Prices fall

Chicago soft red winter wheat, the world benchmark, dropped 0.8% to $6.59 a bushel for July delivery, its 11th negative close in 12 sessions, and a two-month closing low.

Kansas City hard red winter wheat, the type grown in the US southern Plains, for which rain will prove a particular blessing, dropped 1.2% to $7.51 a bushel.

In Paris, November wheat fell 0.8% to E197.25 a tonne, getting little solace from weekly EU export data at a modest 249,000 tonnes, running out of steam towards the close of a record season.

And London's best-traded November contract dropped 0.7% to £146.85 a tonne, with a forecast of the lowest UK wheat exports in recent history in 2013-14 doing little to bolster sentiment.

Coffee reheated

Among soft commodities, the southern Plains rains undermining wheat also dented cotton, which closed down 1.4% at 80.73 cents a pound in New York for December delivery, and down 1.9% at 87.78 cents a pound for the spot July contract.

(Cotton's performance is discussed elsewhere on

But arabica coffee showed signs of greater resilience, dropping to 176.70 cents a pound for July delivery only to recover nearly all its lost ground to end at 181.35 cents a pound, down a modest 0.05 cents.

"The market is well supplied for the moment, but we do expect that situation to decay going forward and going forward and that should be rather supportive to prices," said Sterling Smith at Citigroup.

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