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Evening markets: grains, soy slip further. But sugar rallies

Grains and oilseeds started of this week much as they ended the last one – on negative form, bringing a fresh wave of multi-year lows to futures prices.

Some soft commodities managed gains, notably raw sugar, which added 1.8% to 17.28 cents a pound in New York for October delivery, helped, ironically, by data showing a sharp drop in hedge funds' bullish positioning on the sweetener.

Regulatory data showed a "dramatic reduction in the net speculative long" during the week to Tuesday, Thomas Kujawa, co-head of the softs desk at Sucden Financial, said, "with a sizeable increase in the fresh shorts".

"The short-term price action seems to be dominated… by some weak shorts running for cover, with support seen at 17 cents a pound."

Cocoa hots up

Also in New York, cocoa for September rose 1.5% to $3,128 a tonne, the contract's second-best-ever close, while London cocoa for September rose 1.0% to £1,948 a tonne, continuing to gain help from quarterly grind data late last week.

The Asian cocoa grind rose 5.2% to in the April-to-June quarter, with the North American number up 4.5%, beating expectations, and coming as something of a relief.

Eric Sivry, head of agri options brokerage at Marex Spectron, noted that ahead of the data, "the news flow of the past few weeks built crescendo to a more negative tone.

"It felt as if we were at a crossroads, and that the demand-driven argument that participated to lift the market from £1,400 to near £2,000 a tonne was about to vanish."

He added while the statistics were not "relentlessly bullish", they may "help prices to hold current levels".

'Predicted surge in sales'

However, for grains and oilseed, there was little bullish to prevent fresh selling, which was actually steepest in canola, which had been something of a refuge for bulls, with unduly wet weather in Canada depressing crop expectations, for spring wheat as well as the rapeseed variant.

Still, the outlook now for the Canadian Prairies is that "episodes of warm to hot temperatures and adequate to surplus soil moisture will favour development of spring wheat and canola during this week", according to Telvent DTN.

CHS Hedging said that "warmer and drier weather for the Canadian prairies should be very beneficial for the development" of crops.

Canola for November tumbled 2.1% to Can$443.90 a tonne, a five-month closing low for the contract, weighing on peer rapeseed, which for November ended down 2.2% at E323.25 a tonne, tumbling to E300.50 a tonne at one point.

The extent of the decline in rapeseed has actually been puzzling many investors, with early harvest results a little disappointing in the UK at least.

"The conclusion is that EU merchants and co-operatives have been selling futures ahead of a predicted surge in sales from the farm in the next fortnight," traders at a major European commodities house said.

China order

Compared with rapeseed, Chicago soybeans fared relatively well, especially the old crop August contract, which ended down only 0.1% at $11.75 ¾ a bushel, reaping support from another US announcement of an export sale to China for this season's delivery.

This order, of 120,000 tonnes, when inventories are already running low.

Separate weekly export data showed US shipments of a respectable 96,915 tonnes last week, down from 118,193 tonnes the previous week, but taking the total for 2013-14 to 42.9m tonnes with one-and-a-half months to go.

The US Department of Agriculture has pencilled in shipments of 44.1m tonnes for the whole season.

'Weather leans decidedly negative'

However, new crop November soybeans ended down 1.3% at $10.71 ½ a bushel, their lowest-ever finish depressed by continued expectations of a large harvest ahead, ideas which have only gained momentum with an improved weather outlook for the Midwest.

"Latest weather updates lean decidedly negative [for prices] with a cooler tone to extended guidance, and five day Midwest precipitation coverage of 55% followed by followed by broader coverage Friday through Monday," said Richard Feltes at broker RJ O'Brien.

"Current dryness across Missouri and Nebraska," among the few blemishes on the US crop picture, "will be alleviated early next month".

Besides, USDA data later are expected to show the crop remaining in fine health.

"We estimate crop conditions to come at 72% good or excellent, unchanged from last week, which on seasonal basis is a spectacularly great number," Sterling Smith at Citigroup said.

'Remarkable rating'

For corn, Mr Smith forecast an improvement of 1 point in the good or excellent categories to a "remarkable" 77%.

"Pollination is in the final round and the weather has been excellent, and the market is ripe with yield ideas above the 170 bushels-per-acre level, and this point we see little reason to argue."

"Continued favourable weather and extremely impressive crop condition ratings remain the reasoning to the downward slide in the futures market," CHS Hedging said

US Commodities said that a US corn yield in the range of 168-173 bushels per acre is "possible" (above the USDA estimate of 165.3 bushels per acre) and would "equate to lows of $3.30-3.50 a bushel" in December corn futures.

On that basis, December corn's close at $3.72 a bushel, while down 1.7% on the day and the contract's lowest close yet, will herald more.

US corn exports last week were fine, at 939,791 tonnes, in line with the previous week, but not enough to stimulate a rally on demand ideas.

'Continues to get better'

US wheat export sales were perhaps more impressive, at 515,283 tonnes last week, up from 387,400 tonnes the week before.

And there remain concerns over the European harvest, in terms of quality, with late rains seen as encouraging germination in some areas.

Still, there is the better Canadian weather to factor in, besides the improved results from the US winter wheat harvest.

"US winter wheat harvest continues to get better the further north farmers harvest," CHS Hedging said.

"Yields in northern hard red winter wheat areas have been much better than expected, and the quality of the soft red winter wheat crop has greatly exceeded expectations. "

Paris underperforms

Chicago soft red winter wheat for September ended down 0.3% at $5.30 a bushel, staying just above four-year lows for a spot contract.

"The wheat crop in the US is making good progress in higher-yield regions, which is putting additional pressure on wheat prices," Commerzbank said.

However, Paris milling wheat did set a four-year closing low in ending down 1.7% at E176.25 a tonne, despite concerns over EU harvest quality.

London feed wheat ended down 1.5% at a four-year low for a spot contract of £127.05 a tonne.

Morning markets: US weather renews pressure on corn, soy
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