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Morning markets: soybeans take lead, as stock report looms

To return to the theme of the last market report, bull markets need feeding, so traders say.

And although the last session provided wheat bulls with ample supplies, the cupboard was bare when it came to Wednesday breakfast.

"Wheat markets are nestling back into overbought conditions, which means the bull is going to need to be fed" if prices are to continue rising, Brian Henry at Benson Quinn Commodities said.

But the three supports of Tuesday - Ukraine tensions, US dryness, and demand, led by an Egyptian tender provided little in the way of news, in early trade at least.

Key meeting

Actually, markets were concerned with something dry and American, but that was the Federal Reserve's monthly monetary policy meeting, due to conclude later, the first to be chaired by Janet Yellen.

That lent a somewhat subdued feel to share markets, with Tokyo stocks rising by a modest 0.4%, while Shanghai stocks dipped 0.2%.

The dollar was stable, near its lowest levels in five months.

Still, with news emerging that pro-Russian troops have entered a Ukrainian naval base in Sevastopol, there is scope for the Crimea crisis to kick off again.

'Not going to be a big run'

And wheat might need a boost to plough much higher, given that it is approaching the psychologically important $7.00-a-bushel mark, which the benchmark May contract has not been above since late October.

"The next major point of resistance is $7.00 a bushel. We will see if that level holds," one broker said.

As for the idea of demand, "while the US sale [to Egypt] is a positive, current global demand doesn't indicate there is going to be a big run on US wheat in the near future," Mr Henry said.

In fact, May wheat got to $6.95 a bushel in early deals only to fall back to $6.87 a bushel as of 09:20 UK time (04:20 Chicago time), down 0.7% on the day.

Data ahead

That weighed on rival grain corn too, although just as the grain as failed to enjoy quite the upside seen by wheat of late, so it missed out on the downside too.

Chicago's May contract was 0.3% lower at $4.85 a bushel.

In fact, the relationship between prices of the two grains is likely to come more closely under the microscope on March 31, when the US Department of Agriculture unveils a quarterly grain stocks report.

The last one implied a significant shift by livestock feeders to corn from wheat, whose price premium of more than $2 a bushel rapidly eroded.

'Aggressive feed demand'

As to what the forthcoming report, giving grain stocks as of March 1, will hold, "so far the average stocks guess is about 7.140bn bushels, which is about 1.740bn bushels more than last year", one US broker said, with the increase a reflection of last year's record harvest.

"The market is also assuming a rather aggressive feed demand of about 1.3bn bushels from the last stocks count until now."

As to other demand segments, "exports have been strong", while corn ethanol production "is profitable but demand is capped".

More on ethanol will be revealed later, with weekly US production data, although the figures are expected weak, with transport problems related to the US cold continuing.

"More ethanol plants are going to hot idle as poor rail logistics have ethanol plants waiting for tank shuttles to deliver," CHS Hedging said, noting that spot prices for BNSF rail transport "are bid $4,500, offered $7,500 per car".

Chinese prices

It was left to soybeans to fly the flag for bulls, rising 1.3% to $14.36 a bushel for May delivery, helped in part by the prospect of the March 31 stocks report showing US inventories "at the lowest level since 2003-04", Benson Quinn Commodities said.

Furthermore, there have been some Brazilian harvest downgrades, although to levels above Conab's 85.4m-tonne estimate released last week.

And the oilseed continues to be supported by the lack of cancellations by China of orders of US supplies, as had been expected with the South American harvest now in progress.

And, as for talk of weak Chinese soybean crushing margins and an oversupply of the oilseed, that didn't stop futures rising on the Dalian exchange.

There, September soybeans gained 0.2% to 4,367 yuan a tonne, while September soymeal soared 1.8% to 3,278 yuan a tonne.

Meanwhile, soyoil, the other main soybean processing product, in Chicago added 0.6% to 42.53 cents a pound, supported by a recovery in palm oil in Kuala Lumpur, where the benchmark June contract gained 1.4% to 2,775 ringgit a tonne.

'Downward potential limited'

Palm oil was undermined in the last session by a decision by Malaysia to raise its crude palm oil export tax, by 0.5 points to 5.5% for April, which came on top of soft Malaysian palm export data for the first half of March.

Furthermore, "heavy rainfalls across Malaysia over the past three days have relieved Malaysia's prolonged dry condition since early this year," Phillip Futures said, adding that "the showers may have halted damage to palm oil fruits."

Nonetheless, the Singapore broker said that "we expect lower output in March as earlier droughts has done enough harm on palm oil yield".

And if dry weather returns, Oil World warned that "every additional day of dryness will increase the stress and result in yield losses and correspondingly lower-than-expected production.

"Additional downward potential of vegetable oil prices is limited, considering the bullish palm oil outlook."

Evening markets: Crimea, US and Egypt combine to lift wheat
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