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Evening markets: Midwest rains wash out corn price bulls

Rain fell in some dry areas of the Midwest, so corn prices tumbled too.

A corn market that opened soft, ended down 3.9% at $4.64 a bushel for December delivery in Chicago, in a rout blamed on the arrival of moisture in parts of the western Corn Belt that sorely needed it.

The eastern one-third of Nebraska, northern one-third of Iowa and south western Wisconsin received "0.50 to 2.00 inches of rain" with 65% coverage, said.

"But there were some isolated reports of rainfall amounts of 3 inches in north eastern Nebraska and up to 4 inches and the far southeast corner of southern Minnesota."

'Triggered liquidation'

And that was enough to give bears the upper hand again.

Benson Quinn Commodities said that "rain events in the western corn belt triggered liquidation of long positions in corn and soybeans.

"Some of the driest areas stretching from eastern Nebraska into north east Iowa and portions of south Minnesota are receiving beneficial moisture totals, which include heavy rain in south east Minnesota."

US Commodities said: Rain has fallen over some of the driest areas overnight."

Sizzling Labor Day

It was not that this was viewed as the end of the problems for Midwest crops.

After all, hot and dry weather is on its way back.

The six-to-10 day outlook shows that the Midwest may be on for its "hottest Labor Day weekend ever as a heat dome/ ridge expands east into eastern Corn Belt early next week and reaches the east coast by August 29-30", said.

While some northern areas, such as North Dakota and Minnesota, on the hedge of the heat will see some heavy storms, "all the data strongly suggests that these rains will not get pushed into the heart of the western Corn Belt, eastern Corn Belt regions".

'Stabilise the crop'

But, of course, forecasts can change.

And, as US Commodities noted, the latest rain will at least "stabilise the crop in the areas that received it".

Furthermore, the strong yields reported by the Pro Farmer give investors more comfort over the scope for reductions before any hint of supply tightness comes to bear.

Tweets from the tour, in between offering gastromic advice, remain broadly upbeat over crop prospects, certainly compared with the concerns at large ahead of the event.

'Critical need'

And the higher temperatures will at least benefit the crop by speeding crops' tardy development, so limiting the threat of an early frost.

"The warmest weather of the year will be Sunday through Tuesday. The good news is this is pushing the crop to maturity but at the expense of yields," US Commodities said.

At Chicago-based RJ O'Brien, Richard Feltes said: "In the aftermath of the Pro Farmer Tour, I suspect that the trade will be more tolerant of upcoming high temperatures than would typically be the case, given the critical need to force both corn and soybean crops to maturity."

"I suspect that the market will range trade for the balance of week, although downside is limited with further eroding of crop ratings likely on Monday."

Export data

As a further depressant, corn export sales, at 58,000 tonnes for old crop and 434,000 tonnes for new, were lower than market expectations half some of the more optimistic forecasts.

This leant weight to ideas that US corn is being priced out of the market, with a weak currency only boosting the competitiveness on export markets of rival Brazil.

Soybean shipments were below forecasts too, at 926,000 tonnes of new crop, below forecasts of at least 1.3m tonnes.

'Need moisture'

But at least the oilseed had the support of coming out less rosy from the Pro Farmer tour, with apparently more sub-average findings, and being in the vulnerable pod-setting phase.

Furthermore, their likely development progress makes them appear particularly vulnerable to an early frost.

"Pods are filling in hot conditions, necessitating moisture," Deutsche Bank said.

"Additionally, we estimate that soybeans will mature around the week of October 14, which overlaps with normal frost dates in Iowa and the Northern Belt."

Soybeans for November ended down, but by a relatively modest 1.3% at $12.86 a bushel.

That lifted the new crop soybean: corn ratio heading back towards 2.8: 1.

EU vs US exports

Wheat followed, as has been its wont of late, with OK export sales doing little to cause investors to think twice.

Weekly US export sales came in at 494,000 tones, at the low end of expectations.

It was also below the actual exports made by the European Union, of 579,000 tonnes, backed by a strong French harvest, although farmers raised some concerns about protein levels in the German crop.

(Actual US exports for the week, it has to be said, were 871,000 tonnes.)

While Argentina reduced its estimate for wheat sowings, the downgrade, of 100,000 hectares to 3.9m hectares, represented only a small change, and had been heralded by comments from US Department of Agriculture staff earlier this month.

Chicago wheat for December dropped 1.4% to $6.40 a bushel.

Real effect

Among soft commodities, a recovery in Brazil's real eased some of the pressure on the likes of arabica coffee and raw sugar, in which the country is a major force.

A stronger real raises the value in dollars of Brazilian assets.

However, investors proved unwilling to let coffee off the hook, given ideas of rich supplies, as backed up by FCStone on Wednesday.

September arabica beans eased 0.3% to 113.20 cents a pound in New York, a fresh four-year closing low for a spot contract, while the better-traded December lot dropped 0.1% to 117.05 cents a pound.

Ample stocks, tighter stocks

Raw sugar for October eased 0.1% to 16.28 cents a pound, handed the extra pressure of an International Sugar Organization forecast for the world surplus of 4.5m tonnes for 2013-14, higher than the figure it had indicated in an outline estimate in May.

The ISO forecast that, with another sugar surplus in view, sugar prices might "record more losses during the 2013-14 season".

Cotton too managed to slow its descent, falling 0.1% to 84.18 cents a pound in New York for December delivery after falls totalling 9.7% in the previous two sessions, thanks to improved ideas for the US and Indian crops.

US weekly export sales of 81,000 running bales were not huge, but more than twice those the week before.

Stocks of cotton held for delivery against New York futures fell to 37,131 bales, a 10-month low, indicating tightness on that score.

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