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PM markets: wheat futures rally on Kansas crop damage

Hard red winter wheat futures in Kansas surged, after a sharp cut to winter wheat condition in the US Plains.

US Department of Agriculture crop unveiled a hefty trim to winter wheat condition, particularly in the key hard red winter wheat growing states of Oklahoma and Kansas, after a cold dry December.

The weather conditions in December may be old news, but traders are still digesting the damage that may have been done to US wheat crops while they were away.

And more damage is on the cards, unless enough snow hits the Western Plains to protect seedlings, before a cold snap at the end of the wheat.

"Even though weather for the southern half of the US looks uneventful, traders will be keeping an eye on things amid the recent cold snap we are seeing as some winter wheat areas further north still lack adequate snow cover," said CHS Hedging.

Ukraine forecast

Kiev-based UkrAgroConsult said the country's 2017 wheat harvest could fall to 23.5m tonnes, compared to the 26.1m tonne seen in 2016 by the country's agriculture ministry.

And Ethiopia announced plans to tender for 720,000 tonnes of wheat, rounding out a bullish pictures.

March Kansas wheat futures settled up 2.9%, at $4.26 a bushel, the strongest close since July last year.

March Chicago wheat futures finished up 2.7%, at $4.18 a bushel.

Argentine flooding

It was a mixed picture for row crops, as the South American weather outlook pointed to needed rains in Brazil, but flooding in Argentina threatened soybeans.

"In terms of weather in South America, the buying strength is probably tied to more concern about wet conditions in Argentina more than dryness in parts of northeast Brazil," said Darell Holaday, at Country Futures.

But Mr Holaday said "I will find it difficult to find to truly feel confident about information as in almost all instances the spin is based on their market position". 

Chinese New Year

Paul Georgy, at Allendale, pointed to the looming Chinese New Year Festival, which starts on January 28,

"The question is will they keep up their buying pace of US soybeans into and after the holiday period?"

"Brazil's early soybean harvest could begin by mid-January which will draw China's interest," Mr Georgy said.

March soybean futures settled up 1.9%, at $10.14 a bushel.

March corn futures settled up 1.2%, at $3.60 a bushel.

Indian cane shortage still supporting sugar

The currency of Brazil, the world's top exporter of sugar and coffee, soared some 1.4% against the dollar, to the highest level since November.

This is bullish for prices, as it lowers dollar denominated receipt for farmers and exporters, discouraging sales.  

The news helped extend a raw sugar market rally started in the previous session.

"There seems to be two general theories to explain the price activity namely changes in the fortunes of this year's Indian campaign and the second be an interpretation of the fund activity through November and early Dec," said Tom Kujawa at Sucden Financial.

It was reported on Monday that many Indian sugar mills have already closed for the season, due to a shortage of cane.

"The newswires had stories of slower than expected production in December and perhaps that has sparked the rally with potential for further crop revisions to the downside," Mr Kujawa said.

March raw sugar futures settled up 1.9%, at 20.89 cents a pound.

Currency effect

Arabica prices also surged, helped by the strong real, punching through the 20-day moving average for the first time since early November.

March arabica futures settled up 3.2%, at 141.80 cents a pound.

And robusta prices got a boost from strength in the currency of Vietnam, the world's top robusta exporter.

Robusta shipments are expected to be delayed by the Vietnamese Tet festival.

"Delayed arrivals from Vietnam amid continued rains have kept prices high in the world market," said Jack Scoville, at Sucden Financial.

March robusta LRCc2 settled up $41, or 1.9 percent, at $2,165 per tonne, the highest since Nov. 17.

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