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Evening markets: weather fears lift wheat, and sugar too

However much rain is falling over the US Plains, it hasn't done much good yet to moisture hopes for winter wheat seedlings.

Official US data showed dryness spreading in the week to Tuesday in Kansas, the top wheat-growing state, of which 91.3% is now deemed in drought, up 7.3 points week on week.

In neighbouring Oklahoma, 77.4% of land is in drought, up a smidgen week on week, with dryness spreading in Texas, up 3.2 points to 67.4% in drought.

'Warming up big time'

OK, the area did receive a little moisture on Wednesday, depressing futures prices, but there showers "were too light to significantly ease long-term drought and stress on wheat", MDA said.

"Moisture will remain very short in the south western Plains," the weather service said, adding that "dryness will rebuild in the western Midwest" too.

In the western Midwest 57% of Iowa, the top soybean and corn producing state, is in drought. said that while the eastern Corn Belt will get rains tomorrow, "the Midwest and Plains are dry this weekend, with temperatures warming up big time over the Plains".

'Trade remains on edge'

Warmth is not all bad for the US, given the coldness in soil temperatures, a hangover from an unusually cold winter.

"The US needs warmer temperatures to launch spring fieldwork," Richard Feltes at Chicago-based broker RJ O'Brien said.

Sure, the market is also looking towards two key reports from the US Department of Agriculture on Monday, in estimates for crop sowings, and for grain stocks as of the start of this month.

"I suspect trade remains on edge about the delayed start to the planting season and the dry tone to half of the US hard red winter wheat belt, no matter what the crop report says on Monday," Mr Feltes added.

'Better correction is in order'

Certainly, this time the message of dryness acted to spur a rebound in wheat futures, despite a couple of negative pointers.

One was an upgrade of 4m tonnes, to 700m tonnes, by the International Grains Council in its forecast for the world wheat harvest in 2014-15.

Another was a statement by Egypt's new supplies minister, Khaled Hanafi, that the country, the top wheat importer, wants to cut its buy-ins of the grain 1.0m-1.5m tonnes in 2014-15.

Benson Quinn Commodities said that the US wheat market is getting little support from the cash markets at current levels", adding that "it feels like a better correction is in order". A downward correction that is.

Price moves

But wheat could at least count on decent US export sales of 401,000 tonnes of old crop last week and 328,000 tonnes of new, above many market expectations.

Furthermore, looking ahead, US officials were upbeat over US exports to Brazil next season.

Chicago wheat for May closed up 2.0% at $7.10 ½ a bushel, with Kansas City-traded hard red winter wheat ended up 1.7% at $7.984 a bushel.

Contracts in Europe did less well, despite strong weekly European Union exports, of 816,000 tonnes of soft wheat this week.

Paris wheat for May ended up 0.5% at E211.50 a tonne, while November wheat in London nugded 5p lower to £168.25 a tonne.

'Definitely supportive'

Corn rose too, by 1.4% to $4.92 a bushel for May in Chicago, lifted in part by wheat.

The relationship of the two grains is likely to come close into scrutiny on Monday's stocks report, which may offer an insight into the extent of switching of wheat feeding back to corn, a big dynamic in the last inventory report, in January.

As an extra prop to corn, US export sales were strong, at 1.41m tonnes of old crop last week, plus a handful of new, well above forecast.

"Expectations were just under 1m tonnes, so the number was definitely supportive," said Darrell Holaday at Country Futures.

They helped offset a couple of negatives, with the Buenos Aires grains exchange raising its forecast for Argentina's crop by 500,000 tonnes to 24m tonnes, and an International Grains Council estimate of a record world corn harvest next year, fostering a rise in inventories to a 15-year top.

Mixed export data

Soybeans fared less well at fighting of demons, one being the fears for cancellations by China of import orders, with US export data providing only mild reassurance.

Sure, US soybean exports for 2013-14 remained positive last week, defying the need to cut out 2.80m tonnes from the roster by the end of the season (in August) to meet the USDA forecast of 41.64m tonnes.

However, they were only just positive, at 11,900 tonnes of old crop, with the figure of 535,000 tonnes of new crop below many forecasts too.

And the old crop figure did include a large cancellation, of 170,000 tonnes, down to "unknown", potentially China, maybe signalling that a wave of ditching orders is indeed on its way.

'Plenty of soybeans to move'

As an extra negative, the Instituto Brasileiro de Geografia e Estatística pegged Brazil's sowings of safrinha, or second-crop, soybeans at 745,000 hectares, up from 130,000 hectares last year, a reflection of relatively low corn prices.

Paraguay is thought to have planted 550,000 hectares to second-crop soybeans as well.

And South American supplies from current, main harvests are mounting.

Benson Quinn Commodities said: "Argentine producers are moving soybeans as harvest continues.

"Brazilian exporters have plenty of soybeans to move and to this point their loading efficiencies have been much better than last year."

Still, soybeans for May ended a modest 0.2% lower at $14.36 ½ a bushel, offered some support from soymeal, which ended up 0.3% at $470.50 a short ton.

Soymeal export sales were decent, at 159,000 tonnes of old crop and 31,000 tonnes of new, and there is also the talk of US soy processing plant shutdowns ahead which highlighted earlier.

'Cash market tight'

Among soft commodities, cotton calmed down after its heady volatility of the last session, managing a 1.0% rise to 92.56 cents a pound in New York for May delivery, despite talk that China, the top importer, is to be less generous with its import quota in an effort to persuade mills to use up the country's own huge inventories instead.

Weekly US cotton export sales, at 66,300 running bales of old crop, did not appear a huge cause for celebration either by bulls, if being up 31% week on week.

Still, "the domestic cash market remains tight and is supporting futures prices in the front months," Jack Scoville at Price Futures said, adding that "most producers appear to be sold out, and spinners in the east are forced to pay up to get supplies".

Furthermore, the growing drought in Texas is a worry, with the state the top US cotton producer.

'Nervousness from the bears'

It was left to raw sugar to make a notable move, soaring 2.9% to 17.87 cents a pound in New York for May delivery.

Concerns include the growing likelihood of El Nino, threatening Indian dryness and excess rain in Brazil's cane belt, and fuss raised at the World Trade Organization of India's sugar export subsidy.

"The chat around the market seems to be one best characterised as nervousness from the fundamental bears," Tom Kujawa, co-head of the softs department at Sucden Financial, said.

"With the forecasters increasingly expecting an El Niño pattern this year the market is considering the possibility of a bad monsoon.

"In Brazil there is the possibility of disruption to the early start of the season with bad weather and so perhaps trading from the short side is a little more dangerous than usual."

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