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PM markets: Brazil woes lift coffee. But Ukraine dents wheat

Are there signs of hope for peace in Ukraine?

Russia's foreign minister, Sergei Lavrov, said negotiations taking place in Minsk to resolve the Ukraine crisis should seek an immediate ceasefire.

"I very much count on today's negotiations being devoted above all to the task of agreeing an immediate ceasefire, without conditions."

The comment came in the face of perhaps the most effective threat yet being considered by Western power to bring Moscow into line potentially suspending Russia from high-profile international cultural, economic or sporting events".

This would include Formula One motorsport, European football competitions and potentially some kind of boycott over the 2018 World Cup, which Russia was awarded in 2010.

'Wreaking havoc'

Whatever, wheat futures suffered.

With Russia and Ukraine both major exporters of competitively-priced wheat, the wheat market has been something of a barometer of regional tensions.

And this despite some more price positive news, in terms of further delays to the US spring wheat harvest, with "heavy spotty showers in north western North Dakota wreaking havoc for spring wheat harvest", Benson Quinn Commodities said.

CHS Hedging said: "Rains over the weekend, and more wet weather on this week's forecast will cause harvest to be delayed if not completely stopped in some places."

Decent exports

Furthermore, US Department of Agriculture staff lifted expectations for imports by Algeria, the second-ranked wheat importer, at a time of poor supplies of quality wheat in many major exporting countries.

OK, the US faces competitiveness issues, with transportation squeezes lifting the price of getting grain to port, a factor being reflected in unusually strong US basis, and highlighted by the International Grains Council.

But there was some decent news over that too, with US exports, as measured by cargo inspections, hitting 773,041 tonnes last week, up from 578,942 tonnes the week before, and above most market estimates.

Still, there were 49 wheat contracts delivered against Chicago's expiring September soft red winter wheat contract, 546 against Kansas City hard red winter wheat, and 242 against Minneapolis hard red spring wheat an indication that futures prices may not be too ungenerous compared with the cash market.

Chicago wheat for December dropped 1.5% to $5.55 a bushel, while Kansas City wheat for December dropped 1.8% to $6.31 a bushel.

Paris wheat for November did better, having already dropped a bit on Monday, when US markets were closed, and protected also by a weakening euro, falling 0.1% to E173.50 a tonne.

Yield threats

For soybeans, there was more of the buying often seen as marking month-beginnings in grain markets, with the November contract gaining 0.8% to $10.32 a bushel.

While the narrative of yields from the early US harvest remains huge, there is growing concern of what farmers might find as the process begins in the Corn Belt proper, with mounting talk of infections such as sudden death syndrome, or SDS.

According to University of Illinois Extension educator Mike Roegge there is growing evidence of disease in parts of west-central Illinois.

Big net short

Crop scout Michael Cordonnier said that "an argument could be made for somewhat lower soybean yields based on the amount of sudden death syndrome being reported around the country and the persistent cloudy and wet weather we have had over the last several weeks".

His own opinion is that "the combination of SDS, other diseases, cloudy weather, and excessive vegetative growth, will keep somewhat of a lid on potential increases in the soybean yield.

"I look at it this way - those farmers expecting exceptionally high soybean yields might end up being a little disappointed."

And this against a background of a hedge fund net short in soybeans which, at 22,000 lots, is the highest since 2006, potentially making speculators think twice before putting on more such bets.

Big yields

The same pressures of disease or a large net short were not around to help corn futures, which for December ended down 0.3% at $3.63 a bushel.

Early US harvest results "remain huge", US Commodities said, noting that "yields as far as Springfield, Illinois, on corn are reported at 220-240 bushels per acre".

Furthermore, with no early frost in the forecast, there is "no indication of premature end to the growing season through September 18".

On the demand side, US corn exports were soft, at 873,195 tonnes, down from 1.10m tonnes the week before.

Sugar sweetens

Among soft commodities, arabica coffee for December soared 4.1% to 209.45 cents a pound, its best close in nigh on four months, boosted by supply concerns enhanced by continued dryness both in Central America and in Brazil's coffee belt.

And raw sugar jumped too, by 2.1% to 15.82 cents a pound for October delivery, climbing back over its 10-day moving average, and coming the closest since June to retaking its 20-day moving average.

The rebound comes amid ideas that Brazilian production may be about to tail-off sharply, as the damage from early-year drought comes through.

Mills have kept up cane processing volumes thanks only to a rapid harvest, with yields depressed, leaving the potential for a sharp drop off in volumes as cane supplies run dry.

Furthermore, there is some idea that the reversal in speculator positioning, with hedge funds covering some of their shorts for the first time in nine weeks, may be part of a trend in face of the Brazilian concerns rather than a one-off profit-taking move.

Rabobank had some reassuring forecasts for investors in sugar too, as in cotton, although here the comments found less traction, with New York's December contract ending down 1.9% at 65.31 cents a pound.

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