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Evening markets: Europe's cold snap freezes out wheat bears

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How severe are the concerns over weather damage to South American

soybeans

, and to European and former Soviet Union

wheat

?

Significant enough, anyway, to keep the crops, especially wheat, post positive closes even as many risk assets slipped over a revival in Greek debt concerns.

Investors fretted over the lack of progress on talks to hand Greece a bailout package, and allow the country to repay E14.5bn in debt next month, in return for further austerity measures which politicians appear reluctant to swallow.

That depressed share markets, revived the safe haven of the

dollar

and sent the average commodity a smidgen lower, according to the CRB index.

Stabilised soybeans

However, soybeans managed to end 0.5 cents higher at $12.33 a bushel for March delivery, propped up by ideas for a downgrade in the estimate for the Argentina crop estimate that the US Department of Agriculture is expected to undertake this week, in its latest Wasde report on world supply and demand.

This helped overcome, just, thoughts that a recent improvement in South American weather will revive drought-stressed crops.

And, indeed, they already seem to have done so, with Argentina's farm ministry lifting by 8 points to 64% the proportion of the crop rated in "good" or "excellent" condition.

"Rains fell over Argentina and southern Brazil this past week stabilising crop conditions with more rains forecast in next 72 hours," Benson Quinn Commodities said.

'In the deep freeze'

Wheat was more impressive, adding 1.2% to $6.68 ½ a bushel for March delivery.

But then its weather threat, the cold snap across the Atlantic, is still here.

In the former Soviet Union, "winter grains in European Russia are still in the deep freeze," Gail Martell at Martell Crop Projections said.

"Ukraine temperatures this week will struggle reach the single digits [degrees Fahrenheit] for highs, dropping off to -5 to -12 degrees Fahrenheit at night. The forecast temperatures are 20 degrees Fahrenheit below normal for this time of year.

"Not much snow protection is available in the southern Ukraine where winter wheat is cultivated, just 1-3 inches. This is raising worries over potential winterkill."

'Will be extremely cold'

WxRisk.com said that temperatures this morning "were again unbelievably cold across large portions of Europe" after reaching -20 degrees Celsius in parts of many countries - including France and Germany - the EU's top two grain producing nations, over the weekend.

And temperatures over the next seven days "will be extremely cold", the weather service added.

"From the Pyrenees to north west Russia, temperatures will average 10 degrees Celsius or more below normal. Over the Balkans and southern Ukraine temperatures will average 6 degrees Celsius or more below normal."

'Technical buying'

Closer to the action, Paris wheat for March ended up 2.3% at E222.25 a tonne, its highest close since June, with some technical factors also playing a part.

Monday's closing wheat prices

Paris: E222.25 a tonne, +2.3%

Chicago: $6.68 ½ a bushel, +1.2%

Kansas: $7.19 a bushel, +0.9%

London: £168.50 a tonne, +0.6%

Minneapolis: $8.41 a bushel, +0.3%

Prices for March contracts except in London, where price is for May contract

London's best-traded May lot added 0.6% to £168.50 a tonne.

Back in Chicago, wheat may have drawn some inspiration from

oats

, which soared 4.1% to $3.27 a bushel for March delivery, the highest finish since November.

Chicago has an adage that "oats knows" - ie, that it is a leading indicator for other grains.

As for why, certainly Canada, a leading exporter, has declining stocks, on Friday forecasting a 14.5% drop in inventories as of the end of December, despite a 21% rise in production.

'Negative comments'

But oats could not foster a rise in

corn

, despite the latter coming in with good weekly US export data, as measured by cargo inspections, of 39.4m bushels, up from 22.8m bushels the week before, and from 29.3m bushels the same week last year.

The grain has, like soybeans, suffered significant damage in South America too.

However, the rate of corn use in making ethanol is proving an increasingly high-profile question, especially after the end of tax perks at the close of December, and data last week showing a rise in US inventories of the biofuel to a record high.

"Comments coming out to the ethanol industry continue to be negative with very large ethanol supplies and negative processing margins," Darrell Holaday at Country Futures said.

US Commodities warned that corn use in making ethanol "could slow as the ethanol pipeline is bloated and storage tanks are full".

Corn for March edged 0.25 cents lower to $6.44 ¼ a bushel.

'Surplus will be smaller'

Soft commodities did better, with

sugar

helped by a little by Australia's flooding but also by talk from the Dubai sugar conference which did not live up to the bearish previews for the event.

"One notable headline from Cargill suggested the coming Brazil crop will be 520m tonnes on cane , Indian sugar output to be 26m tonnes , [and] next year's surplus will be smaller," Thomas Kujawa at Sucden Financial said.

Pakistan's announcement of 100,000 tonnes of white sugar exports had been factored in.

Indeed, white sugar for March ended 1.2% higher at $642.50 a tonne in London, while New York raw sugar added 2.3% to 24.50 cents a pound.

Fast money quits

Coffee

rose 1.3% to 218.80 cents a pound, lifted by ideas that a drop in speculators' net long position to a historically low 5,330 contracts may dissuade others from cutting their positions.

Furthermore, there may be bullish news ahead, broker Marex Spectron noted.

By Agrimoney.com

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