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Evening markets: Kansas leads wheat higher, while corn fades

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Wheat

didn't just have weather scares behind it on Tuesday, of the type which lifted it so far in the last session.

This time, it had fair weather from external markets too, with investors appearing to get over their concerns about US sovereign debt, allowing shares a bit of a recovery, and the dollar to slide 0.6%.

A weaker

dollar

helps prices of US-traded agricultural commodities, and other dollar-denominated assets, making them more affordable to buyers in other currencies.

Wheat took the opportunity for further gains, notably in Kansas, which trades the hard red winter wheat crop at the centre of US drought concerns, but also on the other side of the Atlantic too. London wheat gained 2.1% to a record close of £217.00 a tonne, £0.50 below its intraday high.

The strength in global wheat "is all about the weather as the rains promised to the US southern Plains this week have fizzled", Darrell Holaday at Country Futures said.

"In addition, the forecast for Western Europe and China remains dry."

'Point of no return'

Kansas's May contract ended with a rise of 3.4% to $9.26 a bushel, gaining support from official data overnight showing continuing deteriorating in the US crop, and the forecasts for little relief, in America or elsewhere.

US Commodities added that China's dry spell, affecting 25% of wheat area in the world's top producing country, was expected to last at least a further two weeks.

For the US crop, it highlighted that "heading is occurring in Texas and Oklahoma, so we are reaching the point of no return".

And while some weather models do foresee some moisture in these states and other hard red winter wheat areas, many observers have pointed out the growing scepticism of investors at forecasts for rain which have turned out to be inaccurate.

'Too wet'

In Paris, wheat for May closed up 2.1% at E251.25 a tonne, on Europe's dryness concerns, while, back in the US, it was wet which sent Minneapolis wheat up 3.2% to $9.43 a bushel.

"It is too wet in the Corn Belt and the northern Plains," Mr Holladay said.

And in Canada too, where the Canadian Wheat Board forecast sowing delays of up to three weeks as the country gets through a mixture of rain and snowmelt.

Chicago wheat, of the soft red winter variety which is actually in good health, rose 1.4% to $7.85 ¾ a bushel for May, lifted by its peers.

Demand fears

It was the same much of the day for

corn

and

soybeans

too, which gained despite talk that perhaps demand for the two crops was showing signs of being rationed by high prices.

As Luke Mathews at Commonwealth Bank of Australia noted earlier, data on Monday showing weekly US corn export inspections at 32.2m bushels, "down 21% from the week prior and down 20% from the same period last year... are, perhaps, a sign of demand destruction".

Corn ended down 0.4% at $7.49 a bushel for May. So much for the premium it gained over Chicago wheat last week, which has reverted to a discount of more than $0.35 a bushel.

The new-crop December lot did better on spring sowing fears, adding 1.2% to $6.76 a bushel

Cargoes cancelled

Soybeans, meanwhile, had their daily dose of sell reasons, this time stemming from China, whose CNGOIC crop bureau confirmed the cancellation of six-to-eight cargoes of the oilseed from South America and the deferral of some 20 shipments.

China is instead selling down state reserves to meet demand.

And these order rejigs might not be China's last, in the face of negative crush margins, analysis group Oil World warned.

"It is considered likely that additional cancellations or postponement of shipments will be made," Oil World said.

"Given China's importance for global soybean trade, this issue bears the potential for additional downward pressure on soybean prices in the near term."

Chicago soybeans for May closed down 0.2% at $13.42 a bushel.

More losses to come?

How about soft commodities? Could they make better use of the better outside market conditions?

Coffee

did, adding 2.4% to 294.25 cents a pound in New York for July delivery, against a background of continued strong fundamentals, with demand strong and supplies unable to keep up.

However,

sugar

continued to be in bears' control, shedding 0.5% to 24.27 cents a pound in New York for May, a fresh six-month low, while losing 0.8% to 22.62 cents a pound for the better-traded July lot - and with it potentially setting the scene for yet further losses.

"Another close - three in a row - below this level will suggest further follow through lower," Thomas Kujawa at Sucden Financial said earlier.

By Agrimoney.com

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