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Evening markets: wheat prices rise, with Ukraine tensions

Wheat futures, demoted to a follower in grain markets this week, regained leadership as Ukraine tensions mounted again.

Russia has ordered new military exercises on its western border, after Kiev struck against pro-Russian separatists in eastern Ukraine.

Vladimir Putin, Russia's president, warned Kiev there would be "consequences" for Ukraine using its army "against its own people".

But Oleksandr Turchynov, Ukraine's acting president, accused Russia of "co-ordinating and supporting terrorist killers" inside his country.

'Institutional capital is nervous'

The raised tensions, which lifted concerns of Russia invading Ukraine on the pretext of protecting pro-Russian separatists, were reflected in wheat futures, which have been a barometer of the crisis.

The Black Sea region, including Ukraine, is a huge source of competitively-priced wheat exports, meaning that tensions are raising ideas of importers switching to other origins.

"Institutional capital is nervous that rising former Soviet Union tension may prompt buyers of Black Sea wheat to diversify their sources of supply in coming months," Richard Feltes at broker RJ O'Brien said.

Chicago wheat for July soared 2.0% to close at $6.96 a bushel, crossing back above $7.00 a bushel temporarily.

'No relief from drought expected'

Not that Ukraine was the whole story, with the weather forecast for the drought-hit southern Plains, looking dry.

World Weather said: "No relief from drought is expected in the south western US Plains over the next 10 days.

"Hot temperatures Friday and Saturday will exacerbate the situation, with highs in the 80s Fahrenheit and some 90s."

Rainfall ahead?

Sure, interpretations of the weather differed with Darrell Holaday at Country Future, looking in the rear view mirror, saying that "there was a big area in northern Kansas and Nebraska that received very good moisture.

Rainfall south of the I-70 highway, which runs through the centre of the Plains into the central Corn Belt, "was much more regional with southwest Kansas and northwest Oklahoma receiving limited or no precipitation", Mr Holaday said.


And looking further ahead, said that "it looks like most of May 2014 will see large areas of above normal and perhaps much above normal rainfall.

Indeed some data suggest there will be a "significant decrease in the drought areas" in the central and lower Plains and the western Corn Belt "as these heavy rains keep coming in every few days".

Demand signs

Still, forecasts can change.

And what investors were also presented with was decent wheat US export sales data, at 611,000 tonnes old crop and new combined.

As extra signs of demand, Morocco bought 30,000 tonnes of Polish wheat while Jordan tendered for 150,000 tonnes of milling wheat, besides 150,000 tonnes of feed barley, optional origin.

Kansas City hard red winter wheat, the type threatened by the southern Plains drought, also rose, by 2.2% to $7.05 a bushel for July delivery, while Minneapolis spring wheat added 1.8% to $7.26 a bushel, despite data showing Canadian sowings will prove larger than expected.

(Canada's, large, wheat crop is mainly spring planted.)

In Paris, wheat for May closed up 0.6% at E216.00 a tonne, while the better-traded November contract gained 1.2% to E205.00 a tonne.

Strong exports

Meanwhile, corn, the Chicago leader up until today, struggled, shedding 0.5% to $7.09 a bushel for July delivery.

The ceiling represented by the $7.10-a-bushel mark needed some oomph to push through, as noted earlier.

And the grain did have strong US export sales data to count on, at a little over 1.0m tonnes old crop and new combined last week.

'Fieldwork will be delayed'

Furthermore, the weather for Midwest farmers attempting to catch up on sowings was hardly promising.

"Storms developing from the southwest this morning confirm that fieldwork will be delayed for a few days in much of western corn country," CHS Hedging said.

Country Futures said that "enough rain will fall" in the Midwest "eventually slow or stall fieldwork", although easternmost areas look more promising for enabling fieldwork.

Still, as to whether investors have an appetite for injecting more risk premium into prices, Mr Feltes said that "importantly, the 2014 US corn planting season, while starting out slow, is not on track to replicate the pronounced delays of 2013.

"Progress this week can be characterised as 'variable' with some producers making substantial progress while others continue to wait on drier soils and higher soil temperatures."

New crop December corn fell in line, by 0.3% to $5.02 a bushel.

Canola leads

This time, corn was outperformed by soybeans, which bucked a four-day losing streak to end 0.4% higher at $14.70 a bushel for July, rebounding again off the 20-day moving average.

The oilseed complex as a whole received some support from Statistics Canada data showing Canadian farmers intend to plan to 1.2m acres less with canola than had been thought, although the news was tempered for soybeans with a forecast that their plantings of this crop will rise.

Indeed, canola outperformed, gaining 1.2% to Can$460.10 a tonne in Winnipeg for July delivery.

Paris rapeseed lagged, in adding 0.3% to E364.75 a tonne for August delivery.

'China seems to have disappeared'

Soybeans remained under some pressure from talk of Chinese cancellations of import orders, if mainly from Brazil, with supplies now seen heading to the US to tackle that country's supply squeeze.

Still, Allendale noted that "a senior member of the Sunrise group from China is reported as being in the in the US.

"Many traders believe he is here to renegotiate previously sold soybean or soymeal cargoes."

And Country Futures' Darrell Holaday noted that "China seems to have disappeared temporarily recently in the US new crop market", a phenomenon he attributed to importers "pushing a lot of South American purchases to the fourth quarter of the year".

Certainly, new crop export sales were relatively weak, at 118,200 tonnes last week, with only 55,000 tonnes booked by China (which actually imports well over 1m tonnes of soybeans a week from all origins).

Old crop export sales slumped to 800 tonnes, a marketing year low, but still positive, when the US Department of Agriculture needs net cancellations of 1.6m tonnes over the rest of 2013-14 to balance its books.

'Plentiful supply situation'

Among soft commodities, arabica coffee recovered from early session profit-taking, helped by a Citigroup downgrade to its estimate for the Brazilian harvest.

Arabica coffee for July ended up 0.4% at 214.80 cents a pound, the highest close for a nearest-but-one contact since February 2012.

But raw sugar failed to hold on to gains in the last session, when it was helped by estimates from industry group Unica of a fall in Brazil Centre South sugar production in 2014-15.

Commerzbank noted Unica forecasts that sugar prices would have to be 10-15% higher for mills to prefer processing cane into the sweetener, rather than ethanol.

But such a price level "is unlikely to happen in the near future given the plentiful supply situation on the world market, especially since the Brazilian real has been able to recover significantly from the lows it reached in February, thus making sugar exports more expensive".

Raw sugar for July dropped 1.3% to 17.74 cents a pound.

Morning markets: ags start soft, with corn battling charts
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