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Evening markets: Egypt order details heat up wheat futures

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It was that rarity, a "risk on" day, anyway, with a range of less defensive assets, such as

shares

and

oil

, enjoying better times, following reassuring Chinese manufacturing data.

(An HSBC survey showed China's factory activity improving slightly this month, to a level consistent with economic growth of about 9%.)

But grains, again, excelled themselves, notching up grains well above the average 0.8% for commodities, as measured by the CRB index.

The surprise was that it was wheat, the slow starter, which ended up showing the cleanest pair of heels.

Yield question

Sure,

corn

and

soybeans

continued to benefit from the overnight data showing the deteriorating condition of US crops.

For corn, the drop of three points to 57% in the proportion of the US crop rated "good" or "excellent" took the figure 13 points below the year-ago level and represented "the lowest August rating since 2005", US Commodities said.

Darrell Holaday, at Country Futures, said: "We are clearly trading a yield number below 150 bushels per acre," the US Department of Agriculture's current figure being 153.0 bushels per acre.

This has resulted in market where "there is not an overwhelming amount of buying but very solid buying on any weakness and the selling is very minimal".

'Blisteringly hot'

Furthermore, the weather outlook does not like providing much relief.

"Outside of hurricane Irene on the east coast, things look pretty quiet and dry," David Tolleris at WxRisk.com said.

"Over the central and lower Plains as well as the Deep South it will remain blisteringly hot with many temperatures between 95 and 105 degrees [Fahrenheit] over the next seven days," if less perilous in the Midwest.

December corn rose 1.2% to $7.43 ½ a bushel, only 0.5 cents below its contract high reached earlier in the day.

'Demand to stay firm'

Soybeans had some extra boost from carryover optimism over data on Monday showing US imports rising 24% last month, from June, to a 2011 high of 5.35m tonnes.

"[China's] crushing margins have moved into positive territory and with a decline in year-on-year soybean plantings, import demand is likely to stay firm over coming months," Sudakshina Unnikrishnan at Barclays Capital said.

However, with the damage from the soybean crop more reversible than for corn (which is now well through harvest in some southern states) the oilseed adding 0.9% to $13.97 ¼ a bushel, falling back after hitting $14 earlier, for the first time in a month.

"Soybeans continued their trek towards $14.00 with little real excitement," Matthew Pierce at PitGuru said.

Russia vs US

But

wheat

had support from the results of a tender from Egypt, the biggest importer of the grain.

OK, the result again went Russia's way. Egypt took its purchases of Russian wheat to about 1.2m tonnes in less than two months by buying a further 180,000 tonnes, at prices of $284.17-289.00 a tonne.

However, the buoyancy even in Russian export prices – which looks a sign of the shortage of milling wheat that Agrimoney.com highlighted on Monday - raised hope.

"The leader today has been the wheat market with Russia selling Egypt wheat at about $10 per tonne higher that US prices," Country Futures' Mr Holaday said.

"That prompted a large amount of wheat futures buying."

The lowest price Egypt bought at is equivalent to about $7.73 a bushel.

Minny stalls

Chicago wheat for September soared 3.0% to $7.57 ¼ a bushel at the close, just below its two-month high of $7.59 a bushel hit intraday.

Minneapolis spring wheat couldn't ride the tide, despite a further downgrade to the condition of the US crop, adding 0.7% to $9.50 ¼ a bushel.

That path for the variety "got a little rougher as it appears commercials are now covered", Mr Pierce said.

But European lots surfed ahead, with Paris's November lot adding 2.2% to E207.75 a tonne, after itself hitting a two-month high of E208.25 a tonne earlier.

London's November contract added 1.8% to £169.00 a tonne.

'Absence of meaningful hedging'

Soft commodities were broadly positive too, led by

cocoa

, which soared 3.2% to $3,141 a tonne in New York for December delivery, continuing to receive support from technical factors, having crossed its 200-day moving average.

London's December lot gained 2.2% to£1,960 a tonne.

And

sugar

edged 0.1% higher to 40.82 cents a pound, helped by lingering concerns over Brazilian production, amid rising expectations for Chinese demand.

"Owing to a poor domestic crop in the key sugar-producing region of Guangxi, [China's] imports are likely to stay elevated over coming months as China faces a domestic shortfall," BarCap's Ms Unnikrishnan said.

Nick Penney at Sucden Financial added: "Recent headlines have caused the sugar markets to rally in the absence of any meaningful hedging by producers either because they are unsure of what they will finally produce, in the case of Brazil.

"Or in the case of other producers, a willingness to ride the market and maximise the returns on what they will produce."

By Agrimoney.com

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