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Morning markets: softs start September firm. Grains weaken

Month beginnings by repute bring buying on grains markets. But it is by no means an obligation.

Indeed, corn stood 0.2% lower at $3.64 a bushel in Chicago for December delivery as of 09:20 UK time (03:20 Chicago time), returning closer to contract lows set earlier in the month,

The long US weekend for Labor Day, which saw the country's markets closed on Monday, failed to bring any sign of a big deterioration in the weather namely an alert of frost on the near-term horizon to stop crop development early.

Weather outlook

Certainly, the six-to-10 day outlook for the Midwest "is cooler overall", weather service MDA said, but that does not mean unduly cold temperatures.

Indeed, the northern areas, such as North Dakota, with the coolest outlooks on Friday now show a slightly warmer outlook on the MDA map.

And there is no great expectation either of weekly US Department of Agriculture crop progress data later showing any significant deterioration in the US crop.

Furthermore, speculators have plenty of scope for adding further short positions in Chicago corn futures and options, with the net long at 67,593 lots, as of Tuesday last week, compared with a net short of more than 180,000 lots reached in October last year.

Auction results

The same is not so true for soybeans, in which hedge funds already have a net short, of nearly 22,000 contracts, the most since 2006.

And as an extra reason for investors to be wary about getting too negative on the oilseed for now, the results of China's weekly soybean auction showed a large uptick in demand, with 132,135 tonnes (39.2%) of the soybeans on offer sold at today's event.

That compares with 30% last week, and figures of 24%, 23%, 19.2%, 27%, 15.5%, 16.9% and 27% for the previous weeks.

The price achieved, of 4,125 yuan a tonne, was only 1 yuan lower week on week.

Palm recovery

On China's Dalian exchange, soybeans for January gained 0.8% to 4,627 yuan a tonne, one of the contract's best closes.

And elsewhere in the oilseeds complex, palm oil gained a touch too, adding 0.1% to 1,930 ringgit a tonne after data from cargo surveyor Intertek showed Malaysian palm exports falling 4.8% last month.

While hardly an inspiring figure, it at least showed a slower rate of decline than earlier in August, indicating some late-month pick-up in volumes.

Earlier, palm oil dropped to a fresh five-year low of 1,914 ringgit a tonne.

Back in Chicago, rival vegetable oil soyoil for December added 0.3% to 32.22 cents a pound, while soybeans themselves for November delivery gained 0.4% to $10.28 a bushel.

Ukraine situation

The question for wheat investors was whether the grain could take any further strength from the worsening crisis in Ukraine, or indeed the continued delayed US spring wheat harvest.

Certainly, there is even less sign of any accord in Ukraine, with the country upgrading its conflict against pro-separatist, Russia-backed rebels to one against Russia itself.

Even German chancellor Angela Merkel said that the fighting was a "conflict between Ukraine and Russia".

As for the US harvest, MDA said that "spring wheat harvesting will experience delays in the [US] Northern Plains and [Canada's] southern Prairies" in the six-to-10 day outlook, after some scattered showers at the weekend, and further such rainfall expected this week.

'Sound crop'

Still, there is some doubt as to how much the US spring wheat crop has been affected yet.

US Wheat Associates said that, so far, the crop is coming in with average protein content of 13.6%, "equivalent to last year's final average of 13.6%", with a test weight of 61.5 pounds per bushel (80.9 kilogrammes per hectolitre) not far below last year's final figure of 62.3.

The Hagberg falling number is "average is over 400 seconds, indicating a sound crop at this time".

Minneapolis spring wheat dropped 0.3% to $6.27 a bushel, while Chicago soft red winter wheat, the world benchmark, lost 0.3% to $5.61 a bushel.

Harder softs

Among soft commodities, robusta coffee nudged higher again in early deals, adding 0.1% to $2,083 a tonne in London, for November delivery, after yesterday's data showing a steep drop in exports from Sumatra, the major Indonesian producing region.

But raw sugar did even better, soaring 0.8% to 15.62 cents a pound for October delivery, despite a 100,000-tonne cut by Thailand, the second-ranked sugar exporting country, to the quota on the amount of the sweetener reserved for domestic use, meaning more available to sell elsewhere.

The quota was cut to 2.4m tonnes, lifting hopes of the country achieving its forecast exports of 8.8m tonnes in 2014, up from 6m tonnes last year.

Indonesia woes lift coffee, but Ukraine fails to boost wheat
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