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Morning markets: ags start soft, with corn battling charts

Can corn futures bust up through a technical ceiling?

The benchmark July contract failed in the last session to get above $5.10 a bushel, despite a persistent effort by bulls to break above that level.

Getting above $5.10 a bushel "proved insurmountable on numerous occasions, including a push to get corn bought in the last couple of minutes", Brian Henry at Benson Quinn Commodities said.

He added that, technically, "the key levels in July corn are Wednesday's high of $5.10 a bushel and last week's high of $5.13 a bushel".

'Prices can move quickly'

The July contract did break above that in early deals, hitting $5.10 ½ a bushel, but eased back to $5.09 ¾ a bushel as of 09:30 UK time (03:30 Chicago time), up 0.1% on the day.

The potential benefits of a breakthrough are large, in opening up the potential, chart-wise, for another leg up in prices.

At Market 1, Mike Mawdsley said that "if planting delays are seen as persisting, the market could run up to April highs," which for the July contract was $5.24 ¼ a bushel.

"Prices can move quickly when weather/emotions/funds are involved."

"After these levels, you should find some traffic between $5.17-5.20 a bushel and the spike high of $5.24 ¼ a bushel," Mr Henry said.

Whether the contract can get there, in this session, may depend largely on two factors.

Export sales

One is the US weekly export sales data expected later, which are expected to come in at 500,000-800,000 tonnes for old crop, and 150,000-250,000 tonnes for 2014-15 delivery.

"The export sales pace has been rather strong this year," one broker noted, offering the potential for a higher figure.

Indeed, the US Department of Agriculture on Friday unveiled the sale of 128,000 tonnes of US corn to an "unknown" importer this season, and on Tuesday revealed 240,000 tonnes of corn sold to Mexico for 2014-15, both of which came too late to fall into the latest data (taken in the week to  April 17).

'Nervous about planting progress'

The other potential spur is a change in the weather outlook.

It as a turn wetter in the forecast which drove the gains in the last session, after data late on Monday showed US farmers behind in plantings, at 6% as of Sunday compared with the average of 14%.

"Weather concerns have traders nervous about planting progress," CHS Hedging said, with upper Midwest areas in particular likely to see cold and wet weather heading into May.

Mr Henry said: "It feels like many in the fund community are poised to defend their rather large net long position until there is better evidence of planting progress being made or a near-term weather forecast offers better opportunity to make progress."

That said, while Luke Mathews at Commonwealth Bank of Australia note that in the last session, "funds bought strongly on the back of the slow pace of US corn planting… we think it is much too early in the season to become worried about the US planting progress".

'Very little progress will be made'

Weather is factor for wheat too, both in terms of the need in the southern Plains for rain, to refresh drought-hit winter wheat seedlings, and the requirement in the north for drier conditions, to enable spring sowings.

In fact, Benson Quinn Commodities said that it "also looks like very little progress will be made on spring wheat seeding, with regular rains in the forecast for the next two weeks.

"It also sounds like the overall May outlook has turned wet.

Still, it is "way too early to get concerned about planting pace as spring wheat can be planted well into June".

Data later

A revival in Minneapolis spring wheat futures for July stalled with the contract at $7.26 ½ a bushel, down 0.25 cents on the day, just below its 10-day moving average.

Benchmark Chicago soft red winter wheat for July after a volatile start, flowing in and out of positive territory, stood 0.3% lower at $6.81 a bushel.

In the absence of any large shifts in the Ukraine situation, the grain has been taking its lead largely from corn besides from changes in the southern Plains weather outlook.

But there are weekly US export sales to ingest too, expected at 200,000-400,000 tonnes for old crop, and 250,000-500,000 tonnes for 2014-15 delivery.

Furthermore, Statistics Canada will release data on Canada's planting intentions, expected at 24.4m acres for wheat, down some 2m acres year on year.

US imports

Soybeans struggled too, setting course for a fifth successive negative session, still feeling pressure from the continued concerns over import order defaults by Chinese buyers, the world's biggest.

Sure, the US balance sheet looks like ending 2013-14 record tight, as a proportion of demand, even assuming record imports of 65m bushels.

But strong imports are a dynamic which the Chinese order cancellations are facilitating, reducing the need for the market to work to encourage them with yet higher values.

With Canada said to be exporting some 20m bushels of soybeans to the US, with 18m bushels of Brazilian soybeans already on the way, leaving roughly 25m bushels unaccounted for.

"That is roughly the 10-12 cargos that China is rumoured in need of washing out due to its letter of credit problems and negative crush margin woes," Benson Quinn Commodities said.

Soy spreads

Still, with the July contract down only 0.1% at $14.67 ¼ a bushel, spreading appeared less of a factor this time.

The unwinding of long soybean-short corn/wheat spreads has been seen as another factor supporting grain futures.

And the unwinding of long old crop-short new crop soybean spreads has been in play too, meaning outperformance of the November contract.

Certainly, unwinding long old crop- short new crop spreads appeared to be out of the picture for now, with the November contract down 0.5% at $12.21 ¼ a bushel.

The July lot was 0.1% easier at $14.66 ½ a bushel.

Soybean export sales are expected to come in at -200,000-+100,000 tonnes for old crop, and 350,000-550,000 tonnes for 2014-15 delivery.

Sugar eases

Among soft commodities, raw sugar made a more negative start, with the July contract shedding 0.2% to 17.94 cents a pound for July, as investors took profits on the 2% jump in the last session on Unica's first full estimates for the Centre South.

Unica pegged the cane crop at 580m tonnes, in line with estimates from other commentators, but surprised by estimating that more cane will go to make ethanol in 2014-15, rather than sugar, despite the revival in prices of the sweetener.

And will that cane harvest figure prove an overestimate?

"Traders are also now worried that El Nino could result in above average rains through the remainder of the season, something which would slow cane harvesting activities and reduce sucrose yields," CBA's Luke Mathews said.

"Despite the strong gains over the past three sessions, the July contract remains trapped within its two month trading range of 17.0-18.5 cents a pound.

"However, if Brazilian sugar production prospects continue to trend lower, prices may soon test the top end of this range."

Evening markets: US sowings fears give corn rally new life
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