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Evening markets: funds give wheat rally new legs

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Wheat took the honours among grains on Tuesday, looking for its first close above $5 a bushel since August, as funds piled into a grain felt by some to deserve a little catch up with corn.

Wheat faced some technical hurdles, notably a forecast that Australia's crop could go as high as 24m tonnes, and an upgrade by UkrAgroConsult, the Kiev-based group, to its forecast for Ukraine's grain harvest.

However, there was some fair news on demand too, with Japan announcing a 132,000-tonne tender, of which 90,000 tonnes will come from the US, the latest in a series of purchaser quests. Morocco late on Monday unveiled a 200,000-tonne order, but of European wheat.

"Increased demand for wheat on the international front is considered supportive," Terry Roggensack at the Hightower Report said, adding that buying by funds in a market into which farmers are reluctant to sell was also a plus point.

"Wheat is playing catch up following the major advances seen over the past week in the corn and soybean markets," Mr Roggensack added.

Inflation hedge

While December corn, which shuffled around par on Tuesday, has staged a notable revival which actually stretches back a month, jumping more than 25% since then, wheat has remained relatively staid, recovering 15% or so.

With plentiful global supplies, wheat's market fundamentals appeared far weaker.

Still, with investors in search of some protection from inflation, and crops having underperformed other asset classes significantly this year, funds appear to have made an argument for the grain.

Chicago' December wheat contract stood 16.75 cents higher at $5.11 a bushel at 17:44 GMT, looking for the first close for a near-term lot above $5 a bushel for two months.

Weather losses

December Corn was 1.75 cents higher at $3.83 a bushel, as waning hopes for a massive yield hit from Midwest frosts vied for attention with spillover support from wheat.

"Right now we are looking at a potential loss from frost standing at 100m bushels," Allendale said, which is not that significant in the context of a 13bn-bushel crop.

Soybeans for November added 5.5 cents to $10.04 ½ a bushel, seeking their first close above $10 a bushel for a month.

Weather has been a problem for them too, notably in terms of hindering harvesting

Meteorlogix's assessment of Midwest weather was thus: "Freezing temperatures in the western Midwest could have damaged any immature crop. The weather pattern will remain unfavourable for crop drydown and the harvest throughout the Midwest.

"Wet weather disrupts the [soybean] harvest in the Delta states."

Agritel analysts said: "Rains are more concerning for soybeans which have to be harvested in dry conditions."

Sterling effort

In Paris, grain price gains were more muted, in part because of a rise in the euro to its highest level against the dollar since August last year, passing $1.48.

Paris wheat for November ended E0.75 higher at E128.50 a tonne, nonetheless its best close since late August.

London wheat did better, after sterling hit its lowest for six months against the euro, which got back to E1.06 to the pound.

London wheat closed up £1.50 at £104.75 a tonne, its best finish since July.


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