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Morning markets: Russia-West 'kum ba yah' feel weakens wheat

Russia's Micex stock index rose 2% in early deals on Monday, on ideas that tensions between Moscow and Western powers are at least not getting any worse.

But such talk of stability did few favours for wheat bulls, in limiting the chances of disruptions to shipments from Russia or Ukraine, major origins of competitively priced supplies.

"Ideas that everyone is ready to sit down together and sing kum ba yah" are weakening the wheat market, Mike Mawdsley at Iowa broker Market 1 said.

'Forecast is wetter'

Still, not all factors are in favour of lower prices, with wetness remaining a concern for European wheat, in falling on ripe kernels and so threatening quality, as the remains of Hurricane Bertha blow in.

"The forecast is wetter" for Europe, MDA said, adding that "expected showers in north western and central areas should maintain wetness concerns".

The impact of excessive rains has revived some quality concerns in the US too.

Brian Henry at Benson Quinn Commodities said: "In the Northern Plains, there is talk of some vomitoxin in the winter wheat," a reference to a fungal residue which can, in sufficient quantities, leave crop unfit for even animal feed uses.

Shorts covered a bit

"Farmer selling remains limited with the weakness in [futures]," Mr Henry added.

Nonetheless, there was a little less standing in the way of hedge fund selling, after data showed some reduction, of nearly 5,000 contracts, in their net short position in the week to last Tuesday.

That left the net short at a still-elevated 67,000 lots, but below the level the week before which, as the second highest on record, raised concerns over whether appetite for further speculative short positions had been sated.

Wheat for September stood 1.1% lower at $5.43 a bushel in Chicago as of 09:15 UK time (03:15 Chicago time), hanging in just above its 10-day moving average.

One-year low

Besides Ukraine tensions, data is another factor on agricultural commodity investors' minds.

There is the prospect on Tuesday of the US Department of Agriculture's latest monthly Wasde report, deemed certain to feature an upgrade to the estimate for the US corn crop.

But already Monday has brought statistics on Malaysian palm oil inventories, showing a surprise rise in stocks, of 1.5% to 1.68m tonnes as of the end of last month.

Investors had forecast a small fall from June's 1.67m tonnes, to 1.635m tonnes.

The data, reflecting in the main bigger-than-expected production, sent palm oil futures for October down 1.1% to 2,209 ringgit a tonne in Kuala Lumpur, the weakest for a benchmark contract for a year.

'Concerns developing'

Palm's decline limited further progress too in some recovery in futures in canola, a vegetable oil-heavy (rather than meal-heavy) oilseed, whose prices are thus particularly attuned to the oil element.

Canola prices have been staging a further recovery on weather which, in Canada, is proving less than ideal than in the US.

"There are some concerns developing about excessive heat damaging production in Alberta," Citigroup's Sterling Smith said.

(As of the end of July, the last figure available, 73% of Alberta canola was rated good or excellent by provincial officials, up from 61% a year before but actually the lowest rating of any major crop.)

This after the excessive wetness which prevented sowings, or flooded crops, in parts of the Prairies in the spring.

Canola for November edged 0.3% higher to Can$445.00 a tonne in Winnipeg for November delivery.

Old crop strength

Still, back to Tuesday's Wasde, and the prospect of market-moving data often encourages a reluctance among investors to stick their necks out further, and can even bring a bit of profit-taking.

Will the Wasde, after all, bring the improvement in the USDA yield estimates that investors are expecting by 0.4 bushels per acre to 45.6 bushels per acre for soybeans, and by 4.8 bushels per acre to 170.1 bushels per acre for corn?

For soybean investors looking for guidance for what to do from technical signs, charts were actually positive for old crop, with Chicago's August contract ending the last session just 0.25 cents from its week high, strong from the point of weekly charts.

The contract challenged its 50-day moving average too, for the first time in two months, and moved into a gap dating from July 7.

August soybeans stood 0.6% higher at $12.92 a bushel.

US weather outlook

However, the November contract shed 0.4% to $10.80 a bushel, feeling pressure from strong prospects for the US harvest, besides from the weakness in vegetable oils.

December soyoil fell 1.0% to 35.52 cents a pound in Chicago, in palm oil's wake.

Corn, however, nudged 0.1% higher to $3.64 a bushel for December, having already got shot of considerable risk premium, of which soybeans have more to shed.

July, bringing pollination, is a key month for US corn, with August, bringing pod-setting, more crucial for soybeans.

The Midwest weather outlook shows that "expected showers will improve moisture in South Dakota, Iowa and southern Minnesota this week," MDA said.

"However, dryness is likely to continue in central Minnesota."

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