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Evening markets: wheat renews downswing. Corn, soy drop too

There was some feeling among grain investors that wheat's break out of its longest losing streak in two decades in the last session would only herald the start of a new one.

Certainly, the grain showed little muscle this time in Chicago, coming within 1% of falling below $6 a bushel.

And this despite a 100m-bushel downgrade by Informa Economics to its forecast for the US winter wheat harvest.

Still, in leaving it at 1.396bn bushels, that was only 6m bushels below the figure the US Department of Agriculture has already come out with.

"Basically Informa just moved in line with USDA May numbers as they were way too high in May," said Darrell Holaday at broker Country Futures.

'Rainfall more frequently than desired'

In fact, there was some support for hard red winter wheat, the type traded in Kansas City and grown in the southern Plains, and so the biggest worry in terms of US supplies.

Sure, rains in the hard red winter wheat belt are improving conditions for crop which is a little behind, but "will slow wheat drydown in southern areas", weather service MDA said.

Kansas City hard red winter wheat for July closed up 0.5 cents at $7.14 a bushel.

And Minneapolis hard red spring wheat for July managed a 1.0-cent gain, to $6.90 a bushel, offered some support by a dearth of producer selling, and by rainfall dogging efforts to get the rest of the crop in the ground in its northern Plains, and Canadian, heartland.

"The northern US Plains will still see periodic rainfall more frequently than desired, with rain totals of 0.10-0.75 inch in the west and 0.40-2.0 inches in the east by this time next week," World Weather said.

"Canada's Prairies will experience some periodic rainfall over the next two weeks, maintaining a challenge in getting the remainder of this year's crops into the ground."

Export data

However, Chicago soft red winter wheat, the speculators' favourite, was exposed to the full force of funds' quest to cut their net long position, closing down 1.4% at $6.05 a bushel.

Weekly US wheat export sales data were viewed as pretty neutral at 2,000 tonnes for old crop, in the last week of the marketing year in the US, although 341,400 tonnes for 2014-15 was seen as a little underwhelming by many investors.

"New crop sales were traditional business and uninspiring," Benson Quinn Commodities said, noting that the "Black Sea is dominating the global wheat trade aggressively offering out into the latter summer new crop period".

At Citigroup, Sterling Smith said: "The export wire continues to be active but the demand is not really coming to the US."

Dollar to the rescue?

In fact, there was some good news for the US on the export front in that the dollar weakened 0.4%, as European Central Bank measures to revive the euro helped Europe's single currency recover from a four-month low.

A weaker dollar improves the affordability of dollar-denominated exports, such as many agricultural commodities, for buyers in other currencies.

Still, Paris wheat for November did not suffer excessively, falling 0.1% to E191.00 a tonne, if given some comfort with the move on moisture specifications by Egypt's Gasc grain authority which looks like improving the chances of the agency buying French grain.

Soybean exports

The weaker dollar certainly didn't prove enough to protect soybeans from notable falls, with Chicago's July contract closing down 1.5% at $14.60 a bushel.

And this despite positive US export sales of 41,300 tonnes for 2013-14.

Sure, that was "down 32% from the previous week and 51% from the prior 4-week average" the US Department of Agriculture said.

But any positive figure poses problems when the US has already sold more soybeans for 2013-14 than the USDA forecasts, with three months to go in the oilseed's US marketing year.

'Trade is becoming immune'

In fact, the US has now sold 44.97m tonnes of soybeans for 2013-14, 1.42m tonnes more than the USDA's full-season estimate.

But the "trade is becoming immune to positive weekly sales", Benson Quinn Commodities said.

And, after all, new crop sales were "light" at 230,500 tonnes, leaving them "running behind last year's record pace".

Furthermore, a shift by crushers on Tuesday to using August futures as the measure for cash prices, but with basis bids $0.20-0.40 a bushel below where they had been, suggests "the market seems satisfied US will get to new crop without running out of beans".

Technical test

Besides, the July contract failed a key technical test in dropping well below its 50-day moving average for the first time in four months.

The line, a key indicator for chart-following funds, has previously provided significant price support.

In fact, the contract came close to busting back through it 75-day moving average too, at just under $14.58 a bushel.

The new crop November soybean contract actually fell below its 75-day moving average temporarily before recovering to close at $12.10 a bushel, down 0.6% on the day.

'Strong negative for price'

Corn had perhaps the best US export data, with weekly sales for old crop coming in at 550,700 tonnes, "down 5% from the previous week, but up 39% from the prior 4-week average", the USDA said.

That said, new crop sales of 19,600 tonnes were pretty pitiful.

Whatever, "the increase in export activity that should be associated with" the drop in prices over the past month "has not yet appeared to a market-moving degree", Citigroup's Sterling Smith said.

"And the weather continues to be a strong negative for price," with conditions viewed as generally benign for US crops.

Yield upgrades ahead?

CHS Hedging said: "Favourable weather is still on the table for most of the corn growing regions, thus increasing the chances for the market to chew on a potential trend-line yield prospect of 165 bushels per acre or even better."

The market is increasingly talking of the prospect of an upgrade to the USDA estimate for the corn yield as soon as the next Wasde crop report, next week.

As an extra pressure for prices, the United Nations Food and Agriculture Organization lifted its forecast for world coarse grain supplies, and in particular corn.

July corn ended down 1.6% at $4.49 a bushel, while the new crop December contract fell 1.3% to $4.47 a bushel, both four-month closing lows.

Arabica vs robusta

Among soft commodities, arabica coffee for July extended its own decline, dropping 0.6% to 169.15 cents a pound, the first close for a spot contract below 170 cents in three months.

Expectations are recovering a little for the drought-affected Brazilian arabica crop, although it is yet early days in the harvesting campaign.

Conversely, concerns are ticking higher for the robusta crop in Vietnam, the top grower of the bean, with talk of persistent dryness in major coffee areas.

Robusta for July edged 0.1% higher to $1,899 a tonne in London.

'Physical prices still weak'

But both New York raw sugar and London white sugar suffered selling, with investors uncertain in the enthusiasm of end users to purchase at anything but bargain prices, with world stocks seen as ample.

"It still the case is that physical prices are still weak in the western hemisphere, even if Thai sugar premiums are increasing," said Nick Penney, senior trader at Sucden Financial.

"Recent demand and rumoured physical purchases both by Malaysia and China , as well as Japan increasing buying is encouraging but has so far not been reflected in the flat price."

New York raw sugar for July ended down 1.2% at 16.83 cents a pound, a three-month closing low for the contract.

London white sugar for August ended down 1.1% at $460.10 a tonne, also a three-month closing low.

Morning markets: ag bears regain grip. How low can corn go?
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