Evening markets: week ends on sour note for ags, bar wheat

Corn came within an ace of touching $3.50 a bushel for the first time since June 2010 as Midwest forecasts kept rain on the agenda for next week, raising the chances of bumper corn yields, for which Linn Group released an upbeat estimate.

Chicago corn for September touched a fresh four-year low, for a spot contract, of $3.53 a bushel before recovering a little ground to stand at $3.53 ¾ a bushel with half an hour's trading to go, down 0.9% on the day.

The new crop December lot shed 0.9% to $3.63 ½ a bushel , earlier setting a contract low of $3.62 ¾ a bushel.

The losses came amid growing confidence in a strong US corn yield, which Chicago broker Linn Group estimated ending up at 172.8 bushels per acre, putting the harvest at 14.52bn bushels.

Both would set records, with the US Department of Agriculture currently putting the yield at 165.3 bushels per acre.

'Weather has just been ideal'

"We see a lot of the big production states coming with above-record yields," Linn analyst Craig Hays told

"The weather has just been ideal."

There is the potential for crop setbacks, with some of the northern crops looking in a "pretty critical state" and some corn further south requiring rain which, if it fails to arrive, "could take the top end of yield estimates out", Mr Hays said.

But in key Corn Belt states such as Iowa, Illinois and Indiana, "crops are only about 10 days from being made", narrowing the potential for setbacks.

'Will continue favourable'

Besides, rains look on their way.

"US weather will continue favourable over the next two weeks," World Weather said..

Sure, "Midwest rainfall through the weekend and into early next week will be lacking from southern Illinois and the northern Delta through Missouri, Kansas and parts of Iowa to Nebraska and portions of South Dakota.

But net drying in these areas "will cause little concern as long as rain falls in the August 5-12 period, as has been suggested by both the European and GFS model runs".

The weather group said that it "believes the set up for improved rainfall in the lower and eastern Midwest is improving and concern over dryness potentials may be notably relaxed".

'Worry over dryness'

The selling spread to soybeans too, for which August is a crucial month, bringing pod-setting.

While Linn Group pegged the US soybean yield at 45.8 bushels per acre, 0.6 bushels per acre above the USDA estimate, that was a "little tougher to call", with rain next week "pretty important" for maintaining crop potential, Mr Hays said.

World Weather said: "Worry over dryness in soybean production areas in late August and early September might be eased if significant rain falls in the August 5-12 period."

November soybeans tumbled 2.2% to $10.57 ¼ a bushel, with little in the way of fresh talk of export orders to arrest the fall.

In fact, Taiwan is believed to have bought two cargoes of new crop Brazilian beans within the last 48 hours.

Chicago soy took little notice of some favourable trends elsewhere among oilseeds, with soybeans ending up 0.5% at 4,451 yuan a tonne on China's Dalian exchange, while Malaysian palm oil futures closed at 2,283 ringgit, up 26 ringgit in the October contract, amid hopes of lower prices spurring orders.

Germany too?

It was wheat which managed to buck the trend, with the lowball offer to Egypt's tender continuing to boost expectations for US exports of the grain.

It helps too that the European Union – which had been expected to take over top rank in world wheat exports in 2014-15 - looks like being a disappointing force, in quality supplies at least, thanks to the rain damage to its harvest.

There is now growing talk of the German harvest, which traders are relying on for high quality grain to blend with/replace some of the worse stuff from the likes of France, suffering elevated, if not alarming, levels of damage too.

Moisture on ripe grains encourages sprouting, reducing kernels' milling specifications.

Four-year low

Chicago wheat for September added 0.9% to $5.34 ¾ a bushel, and earlier touched its 20-day moving average for the first time in two months.

London feed wheat for November, meanwhile, hit a four-year low for a spot contract of £119.50 a tonne before recovering most of its losses to close down just £0.10 at £122.00 a tonne.

Large downgrades of EU milling wheat means of course more feed wheat, at a time when US corn looks like being ample too.

'To add to the mayhem…'

Paris milling wheat is the wildcard. In theory, it should be supported by a low quality harvest, but the vagaries of actually delivering against the contract, and specification confusion, are making for some unusual moves.

"To add to the mayhem the French Matif wheat futures market has collapsed due to the uncertainty surrounding the contract specification," UK co-operative Openfield said

" It is ridiculous that on August 1 the trade does not know what the Matif quality criteria for delivery are, especially with 80% of the French crop cut and reports of large swathes being downgraded to feed forcing the spread between Matif and Liffe to narrow."

Paris wheat for November actually ended up 0.7% at E171.75 a tonne

Softer softs

Among soft commodities, arabica coffee set a three month high of 207.40 cents a pound in New York for September delivery, boosted by growing concerns over Brazilian production – this year and next - only for pre-weekend profit-taking to kick in.

The contract closed down 1.4% at 192.35 cents a pound, with a round of producer selling once prices began with a 2 seen as also pressuring prices.

Raw sugar for October ended down 0.7% at 16.35 cents a pound, a five month closing low, little helped by downbeat comments from Australia & New Zealand Bank, and with supplies appearing ample for now.

Nick Penney, senior trader at Sucden Financial, said: "Overall we continue to favour the downside as we see a scarcity of supportive news. End user buying has hardly stopped the decline and physical prices continue weak.

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