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Evening markets: grain prices crushed by better weather

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Is this the end of the Leadilocks weather? Markets certainly reflected expectations of a more benign pattern, with grains and cotton posting heavy losses.

From a pattern which was in every way wrong for farmers - giving more rain to wet areas and hampering sowings, and more dry conditions for winter wheat crops desperate for moisture – has given way to something more merciful.

"The southern US Plains had needed rainfall. About 35% of the western wheat belt remains dry versus 50% prior," US Commodities said.

Rival broker Benson Quinn Commodities added that "rainfall chances are improving for areas of the European Union" too, where dryness has been an issue.

Marks, get set...

Meanwhile, forecasts are showing a break in the clouds for the western US Corn Belt, where farmers have been holed up by rain,

"Potential drying conditions over the next week will allow some fieldwork with prospects that corn planting could start as soon as Monday," Benson Quinn said.

And when growers armed with the likes of John Deere 48-row planters get going, progress can be rapid.

"Advances in technology have made it possible for large farmers to accelerate plantings if weather permits," Paragon Economics and Steiner Consulting said, noting that in 2008 growers sowed nearly 70% of the US corn crop in four weeks.

(Actually, farmers were rapido in olden times too, relying on quantity of staff and equipment, but that's another story.)

Belt tightening

Darrel Holaday at Country Futures said: "In a weather market when the weather changes, the market changes. That is the story in the grain market today."

But there were some macroeconomic jitters to add in too, with the US Federal Reserve confirming it will end its $600bn "QE2" quantitative easing programme in June, and the picture in agricultural commodities markets looked significantly more appealing for bears than bulls.

"The US will soon need to significantly tighten the financial belt. This is commodity negative," US Commodities said.

Russian ghost

In Chicago, oats led the decline, furthering their case of being something of a leading indicator, if at the expense of a 5.1% slump to $3.69 ¾ a bushel for the May contract.

Wheat was close behind in finding investors withdrawing weather premium, falling 4.2% to $7.77 a bushel for May and 4.1% to $8.12 a bushel for July.

"There is also the threat of Russia stepping back into the wheat export business in July that haunts this market," Mr Holaday added, despite the country apparently lacking much firepower with which to do business, and certainly not to retain its reputation for undermining world prices.

Kansas hard red winter wheat lost 4.0% to $9.23 a bushel for July, with Minneapolis spring wheat proving most resolute, with a 2.8% dip to $9.54 ½ a bushel, amid continued weather concerns at least on this front.

"The northern Plains and Canada remain wet and cold for the next two weeks slowing spring wheat planting," Benson Quinn said.

Across the Pond, Paris wheat for May lost 3% to E245.75 a tonne, with London wheat down 2.3% at £207.10 a tonne.

Ethanol prop

Corn

prices at least had some better news on the ethanol production front, with last week's soft figure revised upwards, and the latest week's higher still at 883,000 barrels a day.

Besides, with stocks far thinner than for wheat, it has more significant fundamental support too, limiting its decline to 1.8% for the May lot, which ended at $7.52 ¼ a bushel, and the July contract, which closed at $7.59 ¼ a bushel.

The new crop December lot gained some support from the thought that at least the eastern Corn Belt looks like staying uncomfortably wet, losing 1.3% to $6.67 ¼ a bushel.

Meanwhile,

soybeans

, whose prices have not been inflated by such a weather premium, similarly had less to lose. Indeed, faster corn sowings reduce the likelihood of farmers switching to the oilseed, which can be later planted, and so lifting the 2011 crop.

Chicago's May lot ended 0.3% lower at $13.78 a bushel, with the July contract down 0.5% at $13.84 ½ a bushel.

Export question

The prospect of rain in dry southern US regions was a setback for

cotton

too, already beset by signs of demand destruction.

"There has been a noticeable slowdown in the volume of actual [US] shipments of late, which is also a signal that there was an over-commitment and exports may not be nearly as strong as anticipated," said Judith Ganes-Chase at J Ganes Consulting.

Technically, Jurgens Bauer at PitGuru noted that cotton "appears to be oversold".

"But it surely looked overbought on numerous occasions on the way up. What goes up, must come down," he said.

The July lot fell 4.4% to 153.39 cents a pound, with the new crop December lot shedding 3.7% to 124.60 cents a pound

'Snafu-ed'

It was left to

coffee

, which edged up 0.1 cents to 296.40 cents a pound in New York for July delivery, and cocoa to fly the flag for bulls.

Cocoa

for July added 1.2% to £1,927 a tonne in London and 2.4% to $3,168 a tonne in New York on worries that maybe deliveries from Ivory Coast, the top producer, will not be so smooth, despite political resolution there.

"Ivory Coast cocoa is being snafu-ed by customs disputes with exporters. Seems there are questions about the stockpiled cocoa," Mr Bauer said.

Furthermore, Indonesia, the world's third-biggest cocoa exporter, said exports might fall by up to 12.4% this year.

By Agrimoney.com

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