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Evening markets: wheat prices dip as Russia fears stabilise

The fears over the former Soviet Union spurred by Russia's ban on ag imports from many Western countries failed to find fresh traction on Thursday, prompting retreats in many markets.

Wheat has become the barometer for fears over the Ukraine crisis, and broader regional unease, given the status of both Ukraine and Russia as major exporters of the grain, although a touch of unease over short positions was cited in many ag markets in the last session.

But jitters eased as President Vladimir Putin's decree of bans on ag imports from the likes of the European Union and the US, which have placed sanctions on Russia for its role in the Ukraine, failed to spur fresh fears of disruptions in food supplies.

Politics, as well as weather, can be a big spur of crop price rises, as Russian bans on grain exports in previous years have shown.

Nor were there increased signs of Russian invasion of Ukraine.

'More interested in bluffing'

In fact, the market's current view is that "Putin more interested in bluffing/intimidating Ukraine than invading" the country, Richard Feltes at Chicago broker RJ O'Brien said.

At Citigroup, Sterling Smith said: "The most current upside does look to be exhausted, and short term break does look to be in order." 

Wheat futures dropped in Chicago by 0.7% to $5.64 a bushel, for September delivery, as of 11:30 Chicago time (17:30 UK time) on course for their first drop in seven sessions, albeit with the quality concerns over Europe's crop maintaining a support.

In Paris, wheat dropped 0.8% to E176.75 a tonne for November, albeit with the good news for all investors that Socomac and Senalia, which operate the two silos for delivery against Matif contracts, have agreed on updated quality requirements.

Both operators will apply a figure of 220 seconds for Hagberg falling number, with tolerance to 170 seconds, with a standard of 10.5% for protein.

While hardly tight, coming amid a poor quality French harvest, these specifications at least mean that Paris investors now know what they are playing with.

Brazil upgrade

It was hardly a help for wheat futures that US export sales last week, at 591,000 tonnes, were a touch shy of expectations for at least 600,000 tonnes.

For corn, export sales were soft too, at 758,000 tonnes for 2014-15, below hopes for at least 800,000 tonnes.

And, with the US weather outlook remaining benign and wheat, the market leader of late, faltering, corn futures for December were 1.3% lower at $3.69 a bushel.

Brazil's Conab crop bureau raised its estimate for the 2013-14 corn harvest(s) by 355,000 tonnes to 78.55m tonnes.

Above forecasts

For soybeans, Conab trimmed its estimate for 2013-14 production to 85.66m tonnes, from 86.27m tonnes, and further below the US Department of Agriculture estimate of 87.5m tonnes.

And US export sales for the oilseed were not so bad, at 1.0m tonnes for 2014-15, at the top end of market forecasts.

For soymeal, export sales, 252,000 tonnes for 2013-14 and 479,000 tonnes for next season, were well ahead of traders' forecasts, and viewed as a fresh sign of the doubts among buyers of importing from Argentina, the top exporter of soy products.

Argentina farmers are seen as upping stockpiling in the face of the uncertainty provoked by Argentine default on bond payments to hedge funds, with crops representing a dollar-denominated hedge against falls in the peso.

'Million dollar rains'

And old crop soy contracts managed gains, with August soybeans adding 0.4% to $12.42 a bushel, and soymeal for August up 0.4% at $389.40 a short ton.

But new crop contracts struggled with high expectations for the forthcoming US soy crop.

"Some 'million dollar' rains have been observed across parts of the Midwest with more to come," CHS Hedging said, the "million dollar" bit a reference to the importance of this moisture in keeping yield ideas high.

"Forecasts continue to look favourable for August rains across many sections of the Grain Belt."

And for areas which "have been missed to date, chances in the 6-10 day window look optimistic according to the latest US and European weather models".

Soybeans for November were 0.7% lower at $10.73 a bushel.

'Sizeable purchases'

Among soft commodities, cotton for December eased 0.4% to 64.07 cents a pound in New York, after US weekly export sales of 251,000 running bales, OK but hardly outstanding.

Raw sugar for October dropped 1.2% to 16.12 cents a pound.

Sure, there has been some physical buying to cheer bulls, with Sucden Financial noting "further rumours of sizeable purchases by Chinese refineries over the past week of both Brazil and Thai sugar".

However, is the buying sustainable, especially if prices revive?

The level of "16 cents a pound has obviously proved to be supportive in the past few sessions and seems to be the area attracting physical buying. Whether this continues is debateable," Sucden said.

Indeed, ED&F Man flagged the need for the near-term contract to increase its discount against the March 2015 lot to attract demand.

Coffee cools

But arabica coffee fared worst, tumbling 3.1% to 184.90 cents a pound for September, amid ideas that buyers had covered what they were willing to at elevated prices.

At Price Futures, Jack Scoville noted that while "some selling from producers" has been noted, and that there remains a "lot more" to be done, "the buy side of the market is offering weak differentials as they have already bought some coffee".

Furthermore, weather has turned dry again in Brazil's coffee belt, a blessing in that at least it reduces the threat of further premature flowering of trees, ahead of the 2015 harvest.

PM markets: ag prices rise as investors inject Putin premium
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