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Morning markets: benign US weather undermines wheat again

Wheat futures began the new week where they left off the old one.

So far, the grain has closed down eight successive sessions in Chicago.

And it in early deals took aim at a ninth, with the weekend failing to bring cause for investors to reverse their trend of taking risk premium out of values.

Rain on the Plains

The US southern Plains, where drought is an issue, did receive some rainfall, which was "near expectations", according to MDA.

"Rain showers occurred in western Nebraska, north east Colorado, eastern Kansas, and eastern Oklahoma," the weather service said.

"Amounts were 0.25-0.50 inches with 10% coverage."

And there is more precipitation on the way, "of 0.25-1.0 inches, locally 1.25 inches".

"Showers will somewhat improve moisture in south western areas," MDA said, but stressed that "additional rains are needed".

'Only problem is in the US'

Indeed, it is not as if the drought concerns for the southern Plains are over, or that crops in many areas have much chance of recovery.

But with wheat in many other parts of the northern hemisphere thriving, and high prices already having done a job in rationing orders of new crop US supplies, there is some justification for values falling further do now.

"Crops just about everywhere around the northern hemisphere continue to progress well," one European commodities house noted.

"The only problem is in the US but this has already been priced into current markets."

Some concerns

Furthermore, harvest is approaching for winter wheat, and with it the temporary ramp up in supplies which tends to pressure prices (a dynamic which tends to hold true for all crops).

For spring wheat, plantings in North America have been an issue, thanks to excessive rain and cold.

But these problems are waning too.

Where there are some concerns are in Russia, where dryness is growing in Central and Volga Valley regions, and in Australia, where some eastern parts are still drier than desirable for the planting period.

These besides, of course, the long-running fears over knock-on effects from Ukraine's crisis.

But these factors were not enough to prevent investors sending July wheat down 0.6% to $6.70 a bushel in Chicago as of 09:30 UK time (03:30 Chicago time).

Kansas City hard red winter wheat for July dropped 0.7% to $7.62 a bushel.

Minneapolis hard red spring wheat for July fell 0.3% to $7.36 a bushel.

'Will aid planting progress'

The improved planting conditions for spring wheat are encouraging for sowings of corn too, with the northern Plains/Midwest damp having held up seedings of the yellow grain too.

However, with conditions decent in the Corn Belt proper last week, data later is expected to show US farmers having completed 70-75% of plantings (as of Sunday), up from 59% a week before.

And prospects are favourable for wrapping up the rest of sowings.

In the Midwest, "limited shower activity and mild temperatures this week will aid planting progress especially in central and north western crop areas," MDA said.

Chinese auctions?

As an extra concern, there is talk of China progressing plans to auction 1m tonnes of corn, from reserve stocks which are reported as up to 70m tonnes.

(The US Department of Agriculture's Wasde report puts the figure for China's total stocks at the close of 2013-15 at 77.7m tonnes.)

"They could feasibly offer a total of 20m tonnes over the course of the next six months which, combined with good new crop production, would lower their domestic cash values," said Brian Henry at Benson Quinn Commodities.

It would hardly help US prices either, in likely curtailing imports from a significant importing country, if ones whose purchases continue to fall well short of forecasts of many brokers, and indeed the USDA.

Corn for July dropped 0.5% to $4.81 a bushel in Chicago, earlier hitting $4.77 a bushel, the contract's weakest since early March.

Dalian gains

Chinese auctions are a factor for the soybean market too, with the country already having started selling from state supplies.

However, with prices at the first auction, last week, higher than expected, the fallout has not been severe and, indeed, soybeans on China's Dalian exchange extended their recovery, hitting 4,600 yuan a tonne for September delivery, the highest in nearly 10 months.

The contract settled up 0.4% at 4,558 yuan a tonne.

The January contract, the best traded, added 0.8% to settle at 4,509 yuan a tonne.

'Concerns about delayed planting'

That settled some nerves in Chicago.

As did the strong US corn sowing progress, which reduces the prospect of farmers switching to soybeans, which can be later seeded.

As an extra fillip, elsewhere in the oilseeds complex, Winnipeg canola picked up again, adding 0.6% to Can$487.70 a tonne for July to regain its 200-day moving average.

"There are concerns about delayed planting in western Canada and this keeping the market supported for the time being, as the oilseed is difficult to originate in some location, and crushing activities have been strong," said Sterling Smith at Citigroup.

Chicago soybeans for July stood up 0.2% at $14.67 a bushel.

Evening markets: wheat, coffee lead end-of-week drop in ags
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