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Evening markets: crops outperform, helped by charts and rain

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Better to be in commodities than shares on Wednesday.

It wasn't that shares did so badly, posting in general 0.5-1% losses. But raw materials, as measured by the CRB index, added 1.2%, with some of the biggest gains among agricultural commodities, and soft ones at that.

Cotton

closed up just short of the exchange maximum in New York, supported by fears for crop losses, reported at as much as 1m bales, in Pakistan, thanks to overgenerous monsoon rains, again.

The December lot ended up 3.97 cents at 107.82 cents a pound, with rising interest only boosting the fibre's appeal from a chart perspective.

Keith Brown, at Georgia-based brokerage Keith Brown & Co, said: "A close over the August 1 high of 108.62 cents a pound would begin to put more distance between the market and that July low, and reduce the influence of a head and shoulders pattern."

A so-called head and shoulders pattern is typically viewed as a negative sign.

'Oh yes, it does look attractive'

Also in New York, arabica

coffee

dashed 4.6% higher to 263.20 cents a pound for October delivery, with the better-traded December lot soaring the same to 266.80 cents a pound, also largely on technical factors.

Sure, Brazil is expecting more cold weather which, while expected to stay south of the coffee belt, "will bear watching" for frost risk, meteorologists at Televent DTN said.

And stocks at New York's Ice exchange fell a further 1,846 bags to a little over 1.49m bags, their lowest for 11 years.

But investors appeared most interested in contracts' return back above a clutch of moving averages, such as the 50-day line, at 252.03 cents a pound, for the September lot, with Jurgens Bauer at PitGuru noting that the such moves "signal further strength potential".

"Prices are up another 2 cents this morning and, oh yes, it does look attractive on the charts," he said earlier.

China's sweet tooth

And raw

sugar

did even better, soaring 5.2% to 29.49 cents a pound for October delivery, again with technical factors cited.

That said a weaker

dollar

, which dipped 0.4% against a basket of currencies, helped by making dollar-denominated assets more appealing as exports. And

oil

, a factor given that cane can either go to make sugar or ethanol, did its bit by showing gains of 1% or so, boosted by US stocks data.

And there is excitement around about the thought of robust Chinese imports, given that the country now appears to have a structural deficit in sugar, and is next week to undertake an auction of 200,000 tonnes from state reserves to meet demand, its eighth this year.

"Growing Chinese sugar imports are a significant medium-term support to international sugar prices," Luke Mathews at Commonwealth Bank of Australia said.

'Continued harvest delays'

These rises stole some of the thunder from

wheat

, which again proved the star of the grains complex, amid concerns for the US crop

At Country Futures, Darrell Holaday noted "disappointing hard red spring yields and continued harvest delays in the northern US."

Benson Quinn Commodities talked of a "delayed harvest due to excessively wet conditions, whether from rains or high moisture of the wheat itself".

And such talk even made its way to Europe, where London-based Barclays Capital analyst Sudakshina Unnikrishnan highlighted "ongoing weather issues with rains in the Dakotas".

Paris-based Agritel said that the North Dakota harvest is "three weeks late due to late spring seeds. Yields and quality are said to be disappointing".

Hard vs soft

The twist on Wednesday was that it was Minneapolis wheat - of the hard red spring type effected by the harvest delays - which did best, as fundamentals might suggest, adding 2.3% to $9.16 ¾ a bushel for September delivery.

Indeed, "supply of feed wheat and lower grade wheat remains more comfortable, while supply of higher protein grades wheat is tight," Ms Unnikrishnan said.

Chicago, lower protein, soft red winter, wheat, the speculators' favourite, gained a more modest 0.4% to $7.27 ½ a bushel for September, but did record the achievement of a seventh successive positive close – the first such run since January.

That was more in line with Paris (soft) milling wheat too, which gained 0.5% to E201.25 a tonne for November, while its London feed wheat peer dipped 0.3% to £164.00 a tonne.

UK harvest results relayed to Agrimoney.com appear to indicate a decent winter wheat crop, but less favourable yields for the higher-quality spring wheat.

'Disappointment with rains'

Back in Chicago,

soybeans

gained too, adding 1.3% to $13.66 ¾ a bushel, on ideas that the better weather expected for the US this month is not proving as favourable as it was cooked up to be.

"The soybean complex is stronger based on continued disappointment with rains in critical soybean areas in the Midwest," Mr Holaday said.

"There is rain and there will be more rain, but it is not hitting the most parched areas."

Benson Quinn said: "Latest weather updates which still leave eastern portions of the central Midwest dry, while pushing the heat back into the west."

'Pulling out all stops'

However, such forecasts were not enough to enable December

corn

to hold on to its contract high of $7.33 ½ a bushel hit earlier, with debate still raging about how realistic was the US Department of Agriculture's downgrade last week in its US corn yield estimate, to 153.0 bushels per acre.

US Commodities took a bearish line: "The trick of this year when looking at crop ratings is how much adjustment we have for trend yields. The corn yield still could be as high as 156 bushels per acre."

The size of the downgrade looked a sign that "the USDA appears to be pulling out all stops to achieve the maximum rationing prior to the start of the new crop year on September 1".

Also in bears' favour was data showing US ethanol production slipping to 899,000 barrels a day, from 908,000 barrels a day the week before, meaning lower use of corn.

The December lot closed down 0.3% at $7.25 ½ a bushel.

By Agrimoney.com

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