Morning markets: Brazil fire, US dryness, EU rains boost ags

The weather forecast for the US turned a bit drier.

That helped grain prices to a strong start to the week, even Chicago corn futures, which gained 0.5% to $3.64 a bushel in Chicago for December delivery as of 09:45 UK time (03:45 Chicago time).

The lot earlier matched its contract low of $3.61 a bushel, but couldn't fall below it, as the certainty over rains spreading through the Midwest later this week was challenged.

In the 6-10 day outlook "The forecast has trended drier in the North-Central Midwest and Canadian Prairies," MDA said.

"Temperatures are slightly warmer in the Midwest and Delta."

In the 11-15 day outlook too, not that this attracts so much attention given the increased potential for it proving wrong, "the forecast has trended drier in the western Midwest, northern Plains, and Prairies," the weather service said.

"That said, the temperature forecast is cooler in the central Midwest."

Data later

And this when weekly US Department of Agriculture data due is expected to show the condition of US corn, and soybean, crops deteriorating a touch last week, by 1-2 points in the proportion rated "good" or "excellent".

"Ratings should stabilise and work higher into late August if rains late next week materialise," Richard Feltes at RJ O'Brien said late on Friday.

So without the rains…?

Weather conditions are especially important for soybeans, which are undertaking their vulnerable pod-setting period, with corn largely past its sensitive pollination stage, although still requiring moisture to maximise its yield potential.

Hedge fund selling

It has to be restated that US corn and soybean crop ratings would still count as strong even with a couple of points knocked off the good and excellent figures.

Nonetheless, as an extra support for bulls, regulatory data late on Friday showed hedge funds extending their reduction of their net long position in agricultural commodities, at least meaning less long positions now to sell.

In soybeans, they actually reduced short positions by nearly 10,000 lots, but remained net short, a rare occurrence, and one which has a habit of proving short-lived.

In corn, speculators cut their net long position by more than 7,000 contracts to a five-month low of 63,024 lots.

Strong Dalian prices

Soybeans for November added 0.4% to $10.63 a bushel, recovering from a contract low of $10.54 a bushel reached in early deals.

On the negative side for the oilseeds complex, cargo surveyor SGS estimated Malaysian palm oil exports down 2.8% last month, sending prices of the vegetable oil down 1.0% to 2,262 ringgit a tonne in Kuala Lumpur.

Rival vegetable oil soyoil lagged a touch in Chicago, adding 0.1% to 35.74 cents a pound for December delivery.

Meanwhile, Strategie Grains raised, again, its estimate for the European Union rapeseed crop, by 400,000 tonnes to a record 22.9m tonnes.

However, extra support for soybeans came from the Dalian exchange in China, the top importer, ending 1.0% higher at 4,497 yuan a tonne.

European problems

Still, back in Chicago, wheat did better, adding 1.8% to $5.43 ¾ a bushel for September delivery, looking for its first close above its 20-day moving average since May.

Besides being helped by the boost in corn and soybeans, concerns over the quality of Europe's production remain alive thanks to harvest time rains which, in encouraging sprouting, threaten quality.

Indeed, there is the prospect of further damage, with MDA noting that "rains across central areas this week will slow wheat harvesting and lower quality".

And while concern has focused on France, the EU's top wheat producer and exporter, it is "not the only country to suffer quality problems", traders at a major European commodities house said.

"There are still question marks over the Hagberg levels in southern Germany and, overall, the German crop seems to be about 0.5 percentage points lower in protein than the norm."

Hedge fund selldown

As an extra support, hedge funds' negative positioning is particularly notable in the grain, with the net short in Chicago futures and options down 17,000 contracts in the week to last Tuesday to nearly 72,000 contracts.

That is the second lowest on records going back to 2006, questioning the extent of unfulfilled appetite for selling.

For Kansas City hard red winter wheat, the selling has been less marked, a reflection of the quality concerns in Europe, and a drought-hit crop in the US.

Although, at a bit under 13,000 lots, the net long is the smallest in five months, Kansas City wheat for September underperformed in adding 1.2% to $6.40 ½ a bushel.

Harder softs

Among soft commodities, arabica coffee started strong, adding 1.3% to 194.90 cents a pound for September delivery, with a profit-taking wave on Friday deemed overdone, given the growing confirmation of a poor Brazilian harvest.

But raw sugar did better, soaring 2.1% to 16.70 cents a pound after another fire at sugar facilities at the Brazilian port of Santos.

This time, it was two warehouses owned by Cosan, the listed sugar and ethanol giant, with capacity of holding 550,000 tonnes of the sweetener which were damaged. In October, Copersucar's export terminal was gutted.

 The bigger concern is what this means to sugar exports from Santos, which has capacity for selling 12m tonnes of sugar a year.

Evening markets: week ends on sour note for ags, bar wheat
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