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Grain futures dip, after bullish data fail to lift soybeans

Agricultural commodities may have started the day firmly enough, but by the close had rebooted back to their more negative form which has dominated for the last month or more.

There were exceptions.

Raw sugar for July gained 0.4% to 17.10 cents a pound in New York, helped by regulatory data showing a further large turn bearish in hedge fund positioning on the sweetener in the week to last Tuesday.

The data were "viewed as bullish as the funds have put on a decent sized short over the reporting period, although they remain net long as a bloc", Thomas Kujawa, co-head of Sucden's softs desk, said.

Australia-based Green Pool reported a "perception that summer demand [for sugar] is finally picking up".

'Force an exit'

Also in New York, cotton for July added 0.8% to 87.65 cents a pound, with Citigroup's Sterling Smith noting that "some early mill demand was seen lifting values.

"First notice day is rapidly approaching and this will force an exit either into the new crop futures or out of the market."

While Chinese import data showed purchases down 45% year on year last month to 191,500 tonnes, the figure could have been worse, Commerzbank said, flagging an upgrade by 750,000 to 13.5m bales last week in the US Department of Agriculture's estimate for the country's buy-ins.

Still, "the outlook, on the other hand, is becoming increasingly gloomy", the bank added, flagging a USDA upgrade by 500,000 bales to 8m bales in the forecast for Chinese imports in 2014-15, which starts in August.

Furthermore, western parts of Texas received rain at the weekend, boosting prospects for spring-sown crops such as cotton.

New crop cotton for December fell 0.8% to 77.75 cents a pound.

'Soymeal futures broke'

And falls were largely the trend in ag commodity markets, with sentiment in Chicago grains and oilseeds badly dented by the inability of some bullish demand data to hold up prices.

The US Department of Agriculture showed weekly US soybean exports at 215,619 tonnes last week, well up from the 124,242 tonnes the month before.

The Nopa industry group showed the US crush at 128.8m bushels last month, down from 132.67m bushels in April, but well above expectations of a figure just under 127m bushels.

The data "sparked a rally", Darrell Holaday at Country Futures said, adding that it "could not hold".

Was the figure too good?

"That much crush indicates there is a good supply of soymeal and the soymeal futures broke. The soybean complex seems to no longer be able to hold rallies on supportive news."

Data later

Certainly, the idea of strong soymeal supplies tallied with observations of a weaker cash market in parts of the Midwest, with demand viewed as particularly soft east of the Mississippi river.

Soymeal futures themselves dropped 1.2% to $462.40 a short ton for July delivery, the weakest close for a spot contract in getting on for three months.

And as an extra setback for soybeans, expectations grew of an increase in the already-high crop rating figure when the USDA later reveals a weekly update.

Traders expect an increase of 1-2 points in the proportion of the US crop rated "good" or "excellent", from the 74% last Monday.

Soybeans for July ended 0.3% lower at $14.25 a bushel, while the new crop November lot shed 0.4% to $12.17 a bushel, ending back below its 10-day moving average.

'Touch drier weather forecast'

The weekly US crop progress data are also expected to show improvement in the corn crop, currently rated 75% "good" or "excellent", but expected to show an increase of 1-2 points.

The US weather is universally seen as benign, with warmer weather this week for much of the Midwest viewed as likely boosting development rather than invoking any threat of dryness.

"Various extended weather models offer a touch drier weather forecast, but there is no sign of an extended period of threatening weather, Benson Quinn Commodities said.

"Expect plenty of sunshine, but warmer temperatures would be welcome in many areas."

CHS Hedging said: "I know this is becoming repetitive, but weather forecasts are shaping up to be nearly ideal over the next two weeks."

'Funds unwilling to liquidate'

There was some somewhat helpful US export data, showing shipments of 1.10m tonnes last week, down 1.15m tonnes on the previous week, but still a decent figure.

(Compare with that a year before, when the US was still suffering the after effects of the drought-2012 harvest, and when shipments were less than 360,000 tonnes for the same week.)

There was also some idea of producers being reluctant to sell at current prices and, as Richard Feltes at RJ O'Brien said, being "preoccupied with top dressing corn".

Citigroup noting that "funds are unwilling to liquidate below the $4.40-a-bushel level currently", also flagging "some dryness concerns for unirrigated crops in China's Yellow River basin".

Corn in fact closed just above $4.40 a bushel - at $4.41 a bushel for the old crop July contract, down 1.3% on the day, and at $4.42 a bushel for the new crop December lot, down 1.2%.

Harvest catch-up?

Wheat fared better in terms of percentage decline, dropped 0.9% in Chicago for July delivery.

But in closing at $5.81 a bushel it created a worse comparative, in ending at a four-month low for a spot contract.

One negative was an idea of drier weather ahead for parts of the US Plains where harvest is ramping up, potentially allowing farmers some catch up.

"Harvest delay as a result of an active weather pattern in the southern Plains and southern Midwest has gotten the attention of would be sellers," Benson Quinn Commodities said.

"Forecasts indicate the potential for better harvest progress through the course of this week."

'Concerns about dryness'

Soft US weekly wheat exports hardly helped, coming in at 396,437 tonnes, down from 519, 363 tonnes the previous week, and 587,678 tonnes the same week of 2013.

That overcame some of the bullish items in the wheat pit, including the continued focus on a dearth of rain in parts of Russia.

"There are some concerns about dryness in the Volga river basin," Citigroup's Sterling Smith said.

"The area will is forecast to see some rains later this week. However, follow-up rains will be needed."

Mixed European prices

Still, futures managed some gains in Paris, nearer the Russian worry, and which has not suffered the same level of export concern as the US.

Furthermore, the condition of the French soft wheat crop fell 2 points last week, if to a still strong 72% rated good or excellent.

Wheat for November gained 0.3% to E187.75 a tonne.

London feed wheat fell 0.3% to £136.55 a tonne, setting a contract low of £136.50 a tonne at one point, despite the positive of a potential demand boost, for milling wheat, through a "major drive" by UK breakfast cereals group Weetabix to "break into the Chinese market".

"If successful, demand for products such as Weetabix, the UK's biggest selling breakfast cereal, Alpen, Ready Brek and Weetos could soar," and with it demand for local milling wheat, said Gleadell, the UK grain merchant which supplies to Weetabix.

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