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Evening markets: acreage fears lift wheat, helping corn too

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So much for Turnaround Tuesday. Farm commodities, which started off looked set to fulfil the Chicago adage of reversing Monday's trend, actually ended up extending it, and striking a surprisingly upbeat note.

Sure, there was enough around in the broader economic news to keep a lid on many risk assets, with Nicolas Sarkozy, the French president, and Angela Merkel, Germany's chancellor, failing to come up with much in the way of stabilising the eurozone debt crisis.

(Other, that is, than tax on financial transactions which went down badly with markets, sending shares in exchange operators such as NYSE Euronext lower.)

Germany disappointed on economic data too, with growth reaching all of 0.1% in the second quarter, compared with expectations of 0.5%.

"This is not good news given the fact that the German economy is supposed to be the stronger economy in Europe," Darrell Holaday at US grains broker Country Futures said.

It was perhaps little surprise that New York's Dow Jones Industrial Average

share

index stood 1.0% lower in late deals, while

crude

was down 1.4% and many other industrial commodities, such as

copper

, lost ground too.

Prevent plant data

However, Chicago grains had help, brokers told Agrimoney.com, from official data showing that American

wheat

farmers, tested by a woefully wet spring, had claimed on 3.8m acres for so-called "prevent plant" insurance (as reported elsewhere on Agrimoney.com).

With talk of the early US spring wheat harvest coming up with disappointing results too, and with next week set to prove a hot on in southern areas wanting rain to improve conditions for the planting of the next winter wheat crop, futures in the grain put in a late rally.

Some foreign news helped a touch too, with US Commodities noting that "north west Argentina will have temperatures move into the 20s [Fahrenheit] and part of Brazil into the low 30s", chill which "could cause damage to the jointing and heading wheat".

While UkrAgroConsult lifted its forecast for the Ukraine grains harvest by more than 2m tonnes, it was to levels already covered by some other observers.

US vs EU

Chicago wheat for September closed up 1.7% at $7.24 ¾ a bushel, the best close for a spot contract in two months, with Minneapolis spring wheat adding 2.7% to $8.96 ¼ a bushel.

The grain spent much of the later trading above a bushel for the first time since June.

Kansas hard red winter wheat added a more modest 0.8% to $8.17 ½ a bushel, being neither the speculators' favourite (Chicago) nor facing the uncertainty of still being in the field (Minneapolis).

And European lots closed too early to exploit the price rise. Paris November wheat closed down 0.3% at E199.00 a tonne, and London wheat for the same month 0.2% lower at £164.50 a tonne.

'Government too aggressive?'

Still, Chicago

corn

did manage to benefit, putting in a fresh contract high of $7.28 ½ a bushel for the December contract before closing 1 cent below this top, and up 1.0% on the day.

Sure, the grain spent much of the day in negative territory, as investors sulked over crop data overnight which showed that the US crop had not deteriorated last week, as many had expected.

US Commodities said: "The crop ratings yesterday afternoon indicate the crop has stabilised. This brings up the debate if the government was too aggressive" on cuts last week to its corn yield forecast.

Crop concerns

But, as two weeks ago, there were plenty of data doubts, given that grinding down to the state level showed declines in the ratings of top producing states such as Iowa, Missouri and Nebraska.

And talk of poor crops has not ceased, as Mike Mawdsley at Market 1 noted.

"We are still hearing talk about pollination issues, ear size - and it's universal, across the Corn Belt," he said.

Sentiment has been further by a dearth of rain in some areas it is needed.

"The lack of rain in central Illinois and central Indiana continues to get a lot of press and that is prompting buying on any price break," Country Futures' Mr Holaday said.

'All very spooky'

However,

soybeans

were not so lucky, weakened in part by their failure to hold on to key moving averages set just above current levels.

Soybeans for November ended down 1.75 cents at $13.49 ½ a bushel, after failing to cling on to the 50-day moving average at $13.52 a bushel, and failing to hit the 20-day at $13.56 ½ a bushel.

And in New York,

cotton

ended down 0.2% at 103.85 cents a pound for December delivery, weakened by the general macroeconomic sentiment.

"It's all very spooky," the potential knock-on effects on the fibre of a eurozone failure, Keith Brown at Georgia-based broker Keith Brown & Co said, noting potential impacts such as a stronger dollar (making US exports less competitive) and disruption to trade between Europe and China, the top cotton buyer.

Sweet slumbers

That made cotton something of a contrarian among soft commodities, which in general enjoyed an upbeat day, albeit in seasonally-depressed trading volumes.

Nick Penney at Sucden Financial noted that on Monday "the

sugar

markets yesterday posted the lowest volumes in recent memory as European holidays, summer vacations in the Northern Hemisphere and a general lassitude took over".

Volumes were weak on Tuesday too, at about 55,000 lots in New York, down about one-third on normal levels. Still, what interest there was in buying, helping the October contract add 2.0% to 28.04 cents a pound.

In

coffee

, the cold weather in South America noted earlier in wheat helped support an upward move, as did technical factors, with speculators proving reluctant to sell further when so many of them already have short positions in the bean.

(With wheat and soyoil, and it was, as of a week ago, among the only crops in which speculators hold short positions, official data show.)

"Coffee had another extra base hit it with values rising Monday and remaining firm," Jurgens Bauer at PitGuru said.

"Looking to see how 250 and 252 cents a pound get treated, with a settlement above there apt to attract speculative buying," he added, referring to the December lot which actually closed up 2.3% at 255.00 cents a pound.

Meanwhile,

orange juice

added 2.6% to 173.50 cents a pound for September delivery, helped by talk of a hurricane hitting Florida, America's top citrus state.

By Agrimoney.com

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