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Evening markets: grain prices rebound as bears release claws

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Investors have been wondering when bears would have had enough of bashing grains, after driving prices of wheat down 20% so far this month in Chicago, and corn down 15% in two weeks.

Fittingly Tuesday, by tradition the day of futures market turnarounds in the Windy City, brought a distinct change in sentiment.

That reflected in part improved sentiment across financial markets, as hopes grew for Greece's parliament passing the austerity measures needed to secure a rescue package.

Wall Street shares were more than 1% higher in late deals, with the

dollar

down 0.4% against a basket of currencies, reflecting a stronger euro.

And, with a weaker dollar bolstering prices of dollar-denominated assets by making them more competitive to buyers in other currencies, many commodities had an extra support.

Oil

, both Brent and Western Texas Intermediate, stood more than 2% higher in late deals, while

copper

added more than 1% in London.

'Biggest report of the year'

Indeed, the CRB commodities index stood 1.7% higher in late trading. And, against the run of recent play, grains outperformed, helped by a spate of positive fundamental news too.

Sure, investors were seen anyway as unlikely to stick their neck out too much further ahead of key US data on stocks and sowings due on Thursday.

"The [acreage] report is huge, the biggest of the year thus far," US Commodities said.

But many fundamentals turned the way of farm commodities too, with US crop condition data out overnight seeing the health of

corn

,

soybean

and

wheat

crops decline, in terms of the percentage rated in "good" or "excellent" condition – declines which surprised investors.

"The drop in the corn rating number by two points in the US prompted some of the short covering as it caught the market off guard," Darrell Holaday at Country Futures said.

Matthew Pierce at PitGuru said: "If what I saw this weekend in northern Indiana is any indicator, I think we have much bigger problems on our hands than anyone wants to admit."

'Biggest problem'

Indeed, "the path of least resistance [for futures] is to the upside - plain and simple", Mr Pierce added, noting factors such as a dearth of Chinese rainfall, strong US corn ethanol production, and that offers for corn for shipping "are almost impossible to come by", thanks to tight supplies.

Meanwhile, the turn of weather cool in Brazil, a problem for coffee as noted elsewhere on Agrimoney.com, was an issue for corn too.

"Pastures and livestock are at risk and ranchers and farmers are being advised to have additional feed such as hay or silage available for their cattle, especially dairy cattle," Dr Michael Cordonnier at Soybean and Corn Advisor said.

But, more crucially for grain markets, "later planted [second-crop or safrinha] corn is still in the grain filling process and susceptible to the cold temperatures".

"Cold weather is potentially the biggest problem for safrinha corn production in southern Brazil."

'Crop got smaller'

There were signs of demand too at these lower prices, with South Korean feed groups said be looking for 220,000 tonnes of feed wheat.

The result was a market which indeed showed a more upbeat tone, seeing Chicago wheat for July added 2.8% to $6.40 ¼ a bushel, representing a recovery of more than 5% from Thursday's low.

Even so, corn expanded its, atypical, premium over wheat, gaining 3.4% to $6.83 a bushel for July. Still, it lost ground against the December lot, which soared 4.2% to $6.53 a bushel, helped by the weak crop condition data.

"This was the first signal that the crop in the last week got smaller. The prior weeks the crop ratings improved and thus you had to conclude the crop was growing," US Commodities said.

In Europe, grain prices were especially firm, after underperforming on Monday. Paris wheat for November soared 4.0% to E195.00 a tonne while London wheat for the same month closed up 3.6% at £164.75 a tonne.

"Fundamentally, global wheat supply and demand is similar to last year. Concerns for quality are also similar," Jaime Nolan at FC Stone's Dublin office pointed out.

Cotton struggles

Back in Chicago, soybeans managed a weaker performance, up only 1 cent to $13.30 ¾ a bushel for July delivery, a factor in part of the oilseed's lesser interest to speculators. The oilseed avoided the worst of this month's selldown, making short covering less of an issue.

Furthermore, China put a dampener on hopes of an export recovery by forecasting a drop imports of the oilseed, in July – a fall measured either month on month or year on year.

Cotton

struggled too in New York, adding a modest 0.02 cents to 122.01 cents a pound, helped by an unexpected upgrade to the rating of the US crop in the overnight condition report.

Brazil hiccups

The fibre did not reflect the broader trend in the Big Apple, where raw

sugar

added 5.3% to a three-month high of 29.28 cents a pound, helped by data showing an unexpected drop in Brazilian sugar production in the second half of this month.

Unica, the cane industry group which released the data, blamed the 14% decline, year on year, on rain earlier in June which lowered the sugar content in cane.

The better traded October raw sugar contract closed up 4.3% at 27.01 cents a pound, while London white sugar for August ended 5.4% higher at $764.80 a tonne.

And

coffee

made headway after cold snap in Brazil realised long-standing fears of frost damage to crops, if so far in less important areas.

New York's July contract added 3.1% to 257.90 cents a pound, with the September contract gaining 3.1% to 258.90 cents a pound.

By Agrimoney.com

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