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Evening markets: frost forecast cools corn, soybean selling

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Corn managed to end higher. But it was a struggle, requiring help from a frost scare.

The three-point drop in the rating of the US corn crop revealed in weekly data - leaving only 54% in "good" or "excellent" condition compared with 70% a year ago - might have been expected to keep prices buoyant.

But, as US Commodities put it, "the market showed its maturity" in early trading.

"Crop ratings were lower than expected, but the market sank," the broker said.

'Demand destruction is evident'

Darrell Holaday, at Country Futures, said: "The market is having a difficult time finding new buyers at these price levels," what, with corn around contract highs.

Benson Quinn Commodities added: "The trade may take a closer look at demand for corn at these prices, which has not been very robust."

And Matthew Pierce at PitGuru said: "Demand destruction is evident as expressed on the export inspections report yesterday," which put US corn shipments on course for an eight-year low.

"Think, when was the last time we had a major corn purchase over 250,000 tonnes?" Mr Pierce added.

Frost on its way?

And this when there were some bigger doubts over the attractions of agricultural commodities too.

"The risk/reward metric for the funds is not real appealing at these prices," Benson Quinn said noting "ideas that the fund community is getting close to being done buying", an idea especially relevant near month end, when investors often engage in a round of position closing.

The negative thinking was countered by a forecast from Drew Lerner, at World Weather, of the threat of a frost as early as September for parts of the upper Plains and/ or the Midwest.

The forecast didn't meet with universal approval, with David Tolleris, at WxRisk.com saying there was "no actual data that supports" a historically early freeze.

However, the threat perked up corn enough to see Chicago's December contract close up 0.7% at $7.75 ¼ a bushel.

Wheat 'sell'

The forecast helped

soybeans

too, which ended up 0.6% at $13.57 a bushel for November, 20 cents above the contract's intraday low.

The overnight US crop condition report was also helpful to soybean prices, seeing the good or excellent rating fall two points to 57%, compared with 64% a year ago.

But

wheat

had less respite from selling, amid forecasts for rain in the southern Plains, where drought has looked a big obstacle to sowings of the 2012 hard red winter wheat crop.

Mr Holaday, explaining a decision to issue a bearish call on Kansas-traded hard red winter wheat, said: "We are concerned about the amount of winter wheat acres that could end up being planted if there is any change in the conditions in the Southern Plains.

"That fact along with the growing supply of wheat in the world with Australia and Argentina headed toward big crops in December prompted us to make the recommendation."

Prices fall

Benson Quinn was less bearish, saying "anticipated rains in the southern Plains will provide relief to some areas, but these rains are not expected to be distributed very well and more will be needed".

Still, Kansas wheat for September fell 0.7% to $8.67 ½ a bushel, with Minneapolis spring wheat for the same month dropping 0.8% to $9.41 a bushel.

Chicago's September lot finished down 0.9% at $7.50 ¼ a bushel.

The weakness spread to Europe too, where Paris wheat for November closed down 1.6% at E210.75 a tonne.

Hurricane damage

Cotton

, like corn, had a bit of weather-related help, from tropical storm Katia, the next cyclone whipping up to threaten the US, although its uptick petered out in late deals.

Mike Stevens, the Louisiana-based cotton expert, noted cotton buying "over the thought that Katia will possibly pose a threat to south eastern crops, which are considerably more vulnerable" to damage than they were from Hurricane Irene.

On Irene, "damage reports vary, but it would now seem that there has definitely been a mixture of quality and production losses [from] both wind and rain", Mr Stevens said.

New York cotton for December touched 107.00 cents a bushel before easing to close at 105.42 cents a pound, up 0.5% on the day.

Sugar sours

Elsewhere among softs, New York

coffee

maintained its winning ways, adding 0.8% to 286.70 cents for December delivery, the contract's best close since May, on a rally seen spurred largely by technical factors.

However, New York raw

sugar

for October dipped 0.9% to 29.62 cents a pound, pressed by Brazil's decision to ease ethanol levels in gasoline, and so easing competition with the sweetener for cane.

By Agrimoney.com

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