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Morning markets: soy rally stalls. But Ukraine lifts wheat
Can soybean futures manage a third successive day of gains, for the first time in nigh on a month?

The omens didn't look good in early trading, when the benchmark November contract stood down 0.2%, at $10.82 ¾ a bushel, as of 08:30 UK time (02:30 Chicago time), hanging just above its 10-day moving average.

Not that there was much on the overnight wires to prompt ideas of a significant retreat, although futures on China's Dalian exchange traded a little lower in late deals, down 0.1% at 4,346 yuan a tonne for January delivery.

In Kuala Lumpur, palm oil, a rival to soyoil, managed to continue its rebound, adding 0.3% to 2,287 ringgit a tonne for the benchmark October contract, underpinned by data showing a continued, if waning, rise in Malaysian exports, by 3.4% in the first 25 days of the month, compared with the same period of June, according to cargo surveyor Intertek.

Soyoil itself for December nudged 0.1% higher to 36.37 cents a pound.

'Defensive tone'

What the market did appear to have got was something of a pre-weekend feeling, with investors taking profits ahead of the two-day period of being unable to trade.

This is a phenomenon particularly acute in weather markets, which the current one is taking on a few more characteristics of, with ideas of conditions for soybean pod-setting next month turning less than ideal, if not drastically so, and not so much in the short-term.

"Friday trade may take a defensive tone ahead of weekend rains traversing central and eastern Midwest," said Richard Feltes at Chicago broker RJ O'Brien.

Ukraine fears rise again…

Fitting with the pre-weekend idea, corn and wheat, which have performed less strongly, managed gains, potentially on a touch of short-covering.

And that was being encouraged by a fresh round of tensions in Ukraine, where Arseniy Yatseniuk resigned as prime minister, after two parties quit the ruling coalition government.

The resignation was aimed at triggering early elections.

"The fact that the coalition has fallen apart, that laws haven't been voted on, that soldiers can't be paid, that there is no money to buy rifles, that there is no possibility to fill gas storages. What options do we have now?" Mr Yatseniuk told parliament.

And a strong Ukraine government looks a particular necessity with the country's tensions with Russia far from resolved.

The US late on Thursday accused Russia of firing artillery across the border into eastern Ukraine, and of planning to send new missile launchers and heavy weapons to separatist groups.

Spring wheat prospects

Chicago wheat for September rose 0.9% to $5.33 ½ a bushel, helped by continued concerns too over the European Union harvest, on quality terms at least.

This has countered some of the upbeat results coming from the Wheat Quality Council spring wheat tour of North Dakota, which showed a final yield estimate of 48.6 bushels per acre, the highest in 22 years of the event.

That said, the tour also revealed a late-developing crop, a result of the impact of cool and wet weather earlier on, and likely to become a theme in row crop markets later on, when the market questions the likelihood of an early, and damaging, frost.

"After three days on the spring wheat tour there have been two constants - yields are up and the crop is 10 days to two weeks late," CHS Hedging said.

'Undue impediment'

Corn, meanwhile, which has proven a little less sensitive to Ukraine tensions, added a modest 0.2% to $3.70 ¼ a bushel for December delivery.

Indeed, the grain faces a headwind from China's decision to require that all imports of distillers' grains (DDGs), a corn-derived feed product, require a certificate indicating that they are free of the MIR 162 biotech trait which has prompted a series of cargo rejections.

While Washington has approved MIR 162, a Syngenta trait grown by US farmers, Beijing has not.

In fact, the US Grains Council late on Thursday urged China to approve MIR 162, saying that the requirements will cause "disruptions with existing DDGs trade and [make] future DDGs trade hard to achieve."

"China is asking for something that cannot be done. This certificate they're asking for does not exist," said Tom Sleight, the council's chief executive, adding that "the lack of approval of MIR 162 is becoming an undue impediment on trade".

Yield hopes

Whether Beijing concurs is a different matter, of course.

And there are the expectations of a huge US yield to factor in too, with Allendale coming in with a figure of 174.1 bushels per acre.

That "compares to nothing I have ever seen before, but I have heard stories", Brian Henry at Benson Quinn Commodities said.

Still, there are also signs of rising demand at lower values, with Citigroup's Sterling Smith highlighting Thursday's weekly US export data as "very good. The recent low prices did generate good new crop interest.

That said, "whether that interest continues at this pace for time being is entirely another matter".

Freight factor

Another factor to keep an eye on is rising prices at the US Gulf for corn, soybeans and wheat, which if down just to demand might be a more positive thing – but are also down to a rise in transportation prices.

"Expensive freight will continue to limit US competitiveness," Mr Henry said.

Another broker said that the rise in Gulf crop prices "has caused South American prices to become more competitive," yet "the US needs to stay competitive with the potentially large amount of corn and soybeans that we will be producing this year.

"A continuing rise in freight could cause further downside pressure in the futures market."

'Ticking time bomb'

In New York, cotton opened a bit firmer too, adding 0.3% to 66.26 cents a pound for December delivery, after its drubbing of the last session blamed largely on technical factors.

"Cotton erased any bottoming ideas on Thursday as price collapsed through support," Citigroup's Sterling Smith said.

"Global stocks are a potential ticking time bomb and this continues to worry the market as US growing weather is amongst the best we have seen even for cotton in many years."

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