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Morning markets: wheat extends its fall. Soy rises - for now

Where have all the wheat buyers' gone?

Chicago's July contract, which has already notched up six successive negative closes, set course for a seventh one on Thursday, as investors who have spent most of the time since late January trying to find a ceiling to prices have turned to trying to identify the floor.

Without fresh impetus to the Ukraine crisis, and with a large allowance having already been made in US Department of Agriculture estimates for damage to winter wheat crops from the drought in the southern US Plains, focus has turned as to whether indeed futures needed to be at their highest level in nearly a year.

Indeed, have prices at recent levels over-rationed supplies, sending buyers to alternative origins or grains?

'Exports may be hard fought'

"US wheat has priced itself out of the export space for the time being and the board will need to correct that," said Sterling Smith at Citigroup.

At Iowa-based broker Market 1, Mike Mawdsley said that "exports may be hard fought going forward as we are the highest priced wheat in the world".

After all, the US, while expected to cede to the European Union for the first time the title of world's top wheat exporter in 2014-15, is still expected by the USDA to ship 25.9m tonnes of the grain.

And demand from importers out there appears less than buoyant at the moment.

"EU new crop values have narrowed the spread to a Black Sea market that is also having trouble finding a bid," said Brian Henry at Minneapolis-based Benson Quinn Commodities.

'Seasonal weakness'

Mr Mawdsley added: "Yes, Kansas City hard red winter wheat has issues, yes hard red spring wheat is behind in plantings, but remember, some wheat contracts have rallied nearly $2.50 since early February."

Besides, "seasonally we are in the time frame where prices can erode into harvest", with the prospect of a jump in supplies eroding values.

And, chart-wise, the grain has issues too, with Mr Henry saying that the "effortless fall" by Chicago's July contract below its 50-day moving average, beneath which it closed for the first time since February, was "a negative technical input".

"I look for the trade to be more active sellers of rallies going forward."

Prices fall

Certainly, investors hardly had their buying shoes on in wheat, with the July contact shedding a further 1.0% in Chicago to stand at $6.83 a bushel as of 09:20 Chicago time (03:20 Chicago time).

In Kansas City, hard red winter wheat for July was 0.7% lower at $8.00 a bushel, testing its 20-day moving average.

Minneapolis hard red spring wheat was 0.8% down at $7.71 a bushel, struggling for now to fulfil ideas that it at least outperforms in the period to late June, not being in thrall to the same harvest pressure as winter wheat.

Movement later may depend in part on US export sales data, expected to come in at 100,000-300,000 tonnes for old crop wheat, and 150,000-300,000 tonnes for new crop.

Data later

Still, as far as data go, the bigger focus may be in soybeans, which face not just US export sales statistics forecast a small net cancellations for old crop but a positive 200,000-350,000 tonnes for new but monthly numbers on the US crush.

The figure from the NOPA industry group is expected to come in at 130.2m bushels of the oilseed crushed last month, up 8.4% year on year, if below the 153.8m bushels in March.

The prospect of a decent figure has been voiced as one reason why soybeans have maintained a gentle recovery this week even as grains have struggled.

That said, can it last?

The strength in the run-up to the data "could result in a buy the rumour, sell the fact trade", Mr Henry said.

Chinese recovery

For now soybeans for July edged a further 0.2% higher to $14.89 = a bushel in Chicago, helped also by another decent performance overnight by Chinese futures.

The September contract on the Dalian settled up 0.9% at 4,593 yuan a tonne, taking its gains for the week to 3.5%, centred around a Chinese auction from state reserves which showed nearly all supplies bought, and at better-than-expected prices.

Palm oil did its bit too in Kuala Lumpur to help the oilseeds complex, adding 0.6% to 2,622 ringgit a tonne, helped by data from cargo surveyor Intertek Testing Services showing Malaysian shipments up 23% month on month so far in May.

Canola's rally go back on track too, with the July contact adding 0.9% to Can$497.00 a tonne in Winnipeg, although it has yet to take another crack at a taking the psychologically important Can$500.00-a-tonne mark, which it temporarily gained in the last session.

'Chance to advance planting'

Back in Chicago, corn froze, caught between firmness in fellow row crop soybeans and decline in rival grain wheat.

Conditions are better for northern Midwest sowings, with CHS noting that "the 1-5 day forecast looks to provide producers with a chance to advance planting in troubled areas".

That said "temperatures remain much below normal", and there has been a little concern over some frost reports.

Weekly US export sales are expected at 200,000-400,000 tonnes for old crop, and 50,000-350,000 tonnes for new.

Tables turned

Among soft commodities, it was sugar's turn to feel a bit of weakness, with investors taking profits after sharp rises in the previous two sessions on bullish forecasts coming from New York sugar week

Raw sugar futures for July eased 0.1% to 18.23 cents a pound in New York.

Arabica coffee in turn felt a bit of buying after a weak performance so far this week, adding 0.8% to 185.75 cents a pound for July delivery.

Far higher prices could be in the offing, if analyst Judith Ganes-Chase is right.

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