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Evening markets: Russia's return fuels wheat price tumble

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There was blood on the floor in Chicago. But who was to blame?

"We have had a lot of liquidation days in the grains in the last two weeks, but this one will go down as the harshest," Darrell Holaday at Country Futures said.

And that was a fair summation of a day which saw wheat tumble to its lowest price since July last year in Chicago, and stand 8% lower in Paris too at one point.

Chicago corn closed down the daily exchange maximum.

"I know harvest is round the corner. But this was some sell-off," Jerry Gidel at North America Risk Management Services told Agrimoney.com.

China vs Russia

But why?

The absence of China, and appearance of Russia, appeared to have a lot to do with it.

That is, talk faced of Chinese buyers having [already] bought US corn on the break. And certainly, no sale confirmation emerged through the US Department of Agriculture's daily reporting system.

However, what did appear was news that Tunisia had bought 75,000 tonnes of wheat at around $290 a tonne, freight included, believed from Black Sea exporters, but whatever some $15 a tonne cheaper than French wheat is going for.

"A sale to Tunisia at very aggressive levels suggests Russian or Ukrainian origin, which has depressed EU prices," the UK grain arm of a big European trading house said.

Most of the money was on Russia, whose return to grain trading had been taken with some equanimity, given the reluctance of buyers such as Egypt to trust the country with orders again following its export ban. Trust it, at least, until this year's harvest is in the silo.

'Scared us'

Paris wheat for November closed down 7.4% at E196.75 a tonne for November delivery, a three-month finishing low for the contract, and having fallen E1 further at one point.

London wheat for the same month slid 5.8% to a two-month closing low of £164.00 a tonne.

That unnerved Chicago too. "What happened in Paris scared us over here," Mr Gidel said.

And this when political opposition to Greece's austerity plans, raised the idea that the country's problems might not be nearing an end (for now) after all.

Indeed, the

dollar

, which has become an indicator of investor fear, stood 0.4% higher in late deals, despite Ben Bernanke, the Federal Reserve chief, appearing to take a soft line over future monetary policy, which should in theory be dollar negative.

'Tough sell'

If investors needed more reasons to sell, concerns over weather are fading - even over the ridge of hot pressure forecast for the US next week.

"The bulk of the Midwest would welcome warmer temperatures. To this point, the demise of the crop due to hot temperatures has been a tough sell," shallow roots or not, Benson Quinn Commodities said.

And for "now rain makes grain", rival broker US Commodities said.

"Weather has improved around the world. The dry areas of the south east US are now getting moisture. The same is true with some of the dry wheat areas. The central Corn Belt is receiving ideal rain"… and so on.

Funds exit - in volume

Funds certainly sold in volume, by an estimated 30,000 contracts in corn, 8,000 in wheat and 7.000 in soybeans.

And this despite some better news on the ethanol front, with production pegged at a healthy 901,000 barrels a day, signalling steady use of corn by biofuels plants.

Nonetheless, July corn locked down the exchange limit of $0.30 a bushel in Chicago to finish at $6.77 ½ a bushel.

July wheat ended down 5.3% at 6.38 ¼ a bushel in Chicago, and off 4.2% at $7.70 a bushel in Kansas.

Soybeans

, once again, missed out on most of the action, ending 1.4% lower at $13.30 ¼ a bushel for July.

'Uneasy with longs'

Among soft commodities, the sell-off managed to throw new crop

cotton

off guard in New York, where the December lot closed down 2.1% at 121.45 cents a pound.

The July lot maintained its upward swing, adding 4.2% to 161.22 cents a pound.

And it prompted some caution in

sugar

, which fell back to 27.23 cents a pound for July delivery in New York, with some signs of a chart "hammer top" sell sign too.

"Overall, we are uneasy with fresh longs around present levels and expect the market to weaken," Thomas Kujawa at Sucden Financial said.

Juice squeezed

Even

orange juice

closed lower, after early on Wednesday touching 197.50 cents a pound in New York, the highest for more than four years.

Jurgens Bauer at PitGuru said the "break out on the upside seems based purely on technicals", but others cited factors such as disease and hurricane risks in Florida, the top US citrus-producing state.

The July contract ended down 0.3% at 194.20 cents a pound.

By Agrimoney.com

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