PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:33 GMT, Monday, 21st Jul 2014, by
Morning markets: US weather renews pressure on corn, soy

"Was this just a fear trade and the trend resumes lower?" one US broker asked, heading into the weekend, referring to the fact that support that support to grain prices from the Ukraine air disaster was already reversing.

The answer appears to be "yes" given the continued erosion to prices on Monday.

Sure, the rumpus from the downing of a Malaysia Airlines plane on Thursday continues to cause waves at a political level, with France, Germany and the UK warning of further sanctions against Russia unless Vladimir Putin uses his influence over pro-separatist Ukraine rebels to ensures accident investigators full access to the crash site.

But, with no sign of disruptions to former Soviet Union grain shipments, there was little support for grains, which tend to rise in line with Ukraine tensions.

Weather outlook

Indeed, investors turned their attention fully back to US weather, which remains benign.

Rains over the weekend for the Midwest were "near expectations", MDA said, producing scattered showers.

While there will be a spell of warmer temperatures this week, a potential threat to corn pollination in that it is a heat sensitive process, the heatwave will be "brief", the weather service said.

And in fact the 6-10 day outlook "is cooler throughout the Midwest corn-soybean belt versus Friday's outlook", a positive for yield prospects.

Fund moves

Sure, the latest weekly data on hedge fund positioning, released late on Friday, offered bulls some hope in in showing a reasonably sizeable reduction in the hedge fund net long in Chicago corn futures and option, of 14,500 contracts, indicating less pressure from this positional overhang.

(That said, hedge funds last year achieved a net short above 180,000 lots.)

For soybeans, hedge funds went net short for the first time since December 2011.

But that was only a small support compared with the prospect of US Department of Agriculture data later on Monday expected to show the strong condition of US corn and soybean crops at least remaining stabile, and potentially improving further.

Prices fall

Corn for December fell 1.5% to a fresh contract low of $3.73 a bushel as of 09:35 UK time (03:35 Chicago time).

(The decline also introduced in the chart a small gap, which tends to excite technical analysts, between $3.76 a bushel and $3.77 a bushel.)

The old crop September lot was 1.4% down at $3.66 a bushel, introducing a gap between $3.69 and $3.70 a bushel.

Soybeans were 1.2% lower at $10.72 a bushel for the new crop November contract, not yet setting a fresh contract low, with the August lot down 0.5% at $11.71 a bushel.

'Export business is picking up'

There was some Chinese import data showing OK volumes, of 6.39m tonnes, but this had already been factored into the market.

China has been more active in forward purchases of late, with a succession of orders from the US last week, and the market will be on the look out for more announcements later.

"While this is normal business for new crop given the large amount of soybeans we export to China, it still is a sign that export business is picking up after a large break," one US broker said.

Soybean futures on the Dalian market were little changed, ending down 6 yuan at 4,322 yuan a tonne.

In Kuala Lumpur, palm oil was 0.6% lower at 2,296 ringgit a tonne despite data showing Malaysian exports holding up, gaining 7.8% in the first 20 days of July, compared with the same period of June.

The strength of the ringgit - which gained a little ground against the dollar, making Malaysian exports that much more expensive for buyers in foreign currencies was seen as undermining prospects for future exports.

Too wet, too dry

Back in Chicago, wheat for September eased 0.7% to $5.28 a bushel, pressured by the ongoing harvest in the US, but with at least some weather concerns elsewhere in the globe to offer support to prices.

In Europe, rains are raising concern over the quality of production, if not the quantity, with harvest-time rains encouraging sprouting and imperilling milling characteristics.

Farmers "remain anxious concerning this grain's quality since germination still is an issue", Agritel said.

(Still, "rains that are delaying winter wheat harvest in the EU are likely benefiting corn production, with the exception a little bit of flooding," Brian Henry at Benson Quinn Commodities said.)

And there will be further rains "across central areas" of Europe this week, which "will stall wheat harvesting", MDA said.

Meanwhile, in Australia, the weather service said that only "isolated showers are forecast in eastern areas and dryness will continue to rebuild".

Cotton gains

In New York, cotton futures did better, edging 0.3% higher to 67.96 cents a pound for December delivery, with Chinese import data for June coming in not too bad.

At 218,246 tonnes last month, China imported 19.1% less than in June last year, but a decline has been expected. Indeed, the June figure was well below the average rate of fall, of 42%, so far in 2014.

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