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Evening markets: wheat futures get vertigo. But soy revives

Wheat futures managed to get to $7 a bushel in Chicago, but it couldn't stay there.

Actually it was just the thinly-traded March contract which, a day before expiry, managed to get to $7.00 3/4 a bushel.

The better-traded May lot topped out at $6.96 1/2 a bushel.

Whatever, neither contract could stay at their highest level in more than four months for long, as the vertigo among commentators that highlighted earlier over the concerns of Ukraine weather and US cold came into play.

Sure, these fears are worth injecting risk premium for - but how much?

'Basis generally weaker'

"Ukraine tensions and dry conditions in the US hard red winter wheat areas remain strong undercurrents in the world wheat markets," CHS Hedging said, noting that "rain chances for the US hard red winter wheat areas remain thin and scattered".

However, the broker also flagged that "US wheat basis appeared generally weaker again today", thinking in particular of spring wheat country.

And as for Ukraine concerns, the US Department of Agriculture attaché in Kiev "said that wheat crop prospects for the Ukraine remain 'generally favourable' as fuel, fertilizer, seed and credit seem available".

 'Potential blow-off'

Once selling set in, it somewhat snowballed, as the technical signs which have played a big part in luring investors in turned negative.

Paris's May wheat contract was showing "an initial sign of a potential blow-off", that is a rapid sell-off following a rapid rise, Jaime Nolan Miralles at FCStone's Dublin office said, as the downward march gained momentum.

"Gapping higher on open this morning and trading a high of E216.00 a tonne before pulling back from its 50% retracement level of E216.32," a Fibonacci point, it was good fodder for technical investors seeking an excuse to sell.

"Should we close out the session with a lower close to yesterday's market, when coupled with the overbought nature of the market, this may make room for bears/profit-taking to initiate a move to the downside and fill the gap back down to E197.50 a tonne," Mr Nolan added.

Prices fall

In fact, Paris wheat for May closed down 1.0% at E213.50 a tonne after, at E216.00 a tonne, hitting its highest in nearly a year.

Mr Nolan noted too an upgrade by FranceAgrimer to 3.17m tonnes in its forecast for French wheat stocks at the close of 2013-14, and weak wheat basis in Europe too, below average levels.

Chicago wheat did worse, dropping 1.5% to $6.73 3/4 a bushel for May, and by 1.3% to $6.79 a bushel for the March contract.

US weekly export sales were viewed generally as fine, but not fantastic, at In fact, down 14% week on week at 477,000 tonnes for old crop.

(European Union soft wheat export licences were also OK, but not outstanding, at 571,000 tonnes. The USDA set a high bar in raising on Monday its forecast for all EU wheat exports in 2013-14 to 29m tonnes.)

Warmth on its way

Weakness in wheat weighed on corn too, as did the prospect of warmer weather in the Corn Belt, reducing concerns of low soil temperatures holding up spring plantings.

US Commodities noted forecasts that "cold temperatures will be exiting the eastern Midwest by Friday and a pattern of seasonal temperatures takes hold into March 23-24.

"Any real cold will be isolated to the far eastern Midwest."

While Allendale came in with a forecast for corn plantings a little lower than that from some other commentators, it was still a historically high figure, the fourth biggest since World War II.

Corn for May closed down 0.7% at $4.85 a bushel, but remained above its 10-day moving average.

US old crop export sales at 683,400 tonnes were also viewed as fine, if down 55% week on week.

China jitters

It was all lining up then for a big drop in soybeans, especially when economic fears over China, the top importer of the oilseed, are running high, after poor industrial production and retail sales data.

The statistics "suggest that the Chinese slowdown could be a bit faster than expected and GDP growth could possibly drop below the government's 7.5% GDP growth target as soon as the first quarter", Danske Bank said.

Such fears sank shares, which fell 1.2% on Wall Street, besides prompting a small fall in commodities overall, with China a huge buyer.

And soybeans appeared sure for a drop as talk mounted too of cancellations of orders from Brazil, with knock-on effects for US prices.

'Trying to resell soybeans'

"Rumours persist over China cancelling or trying to resell soybeans from Brazil," US Commodities said, if adding that it had seen "no confirmation".

"Brazil ports are seeing a shift to corn loading which suggests the rumours may be true," the broker added.

Jefferies Bache flagged reports that "10 cargos, about 500,000 tonnes of Brazilian and Argentine purchases have been cancelled with another 30 cargos likely to be delayed or cancelled".

Still half decent US export sales - a positive 113,500 tonnes of old crop, when net cancellations are needed to meet the USDA forecast for the full 2013-14 eased jitters, even if there was a 81,800-tonne decrease down for China.

On actual exports, China took 389,500 tonnes of US soybeans last week.

'Concerns about export delays'

And as an extra support, a ship carrying soybeans ran aground in Argentina's main grains port, Rosario, slowing export from that origin.

The news "has generated concerns about possible export delays," Jefferies Bache said noting that Rosario handles roughly 80% of Argentina's grain, oilseed, and biodiesel shipments.

Furthermore, the end of the wheat rally put a block on the reversal of "long soybean, short wheat" bets too.

Soybeans for May added 0.7% to $13.96 1/4 a bushel, enough to stay ahead of the20-day moving average, but not to regain the 10-day one.

Coffee emergency

Among soft commodities, coffee and sugar had, for them, relatively quiet days, even though the Brazil agriculture ministry declared a state of emergency in Minas Gerais, the country's top coffee-growing state, because of an outbreak of the borer beetle pest.

Arabica coffee for May closed up 0.3 at 205.95 cents a pound in New York, where raw sugar for May gained 0.8% to 17.82 cents a pound, recovering some ground lost earlier in the week.

It was cocoa which fared better, adding 1.3% to £1,875 a tonne in London for May, and by 2.0% to $3,006 a tonne in New York, both two-year closing highs, remaining underpinned by concerns over consumption exceeding output.

"For the current 2013-14 season, the second deficit in a row is predicted despite the fact that deliveries in West Africa proved surprisingly positive," Commerzbank noted.

Morning markets: fund buy lifts wheat again, Soy rises too
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