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Evening markets: grain prices tumble, sunk by Greece jitters

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There was a prevailing wind blowing in Chicago markets on Wednesday, and it was gusting south.

New York soft commodities were not so badly affected by the latest bout of risk-off trading on the back of the struggle in Greece to build a coalition government, days after the poll, and the election of an anti-austerity president, Francois Hollande, in France.

Raw

sugar

for July closed up 0.1% at 20.38 cents a pound in New York, having earlier set a 20-month low of 20.13 cents a pound.

New York

cocoa

for July ended up 0.3% at $2,334 a tonne, while July

coffee

added 0.1% to 175.05 cents a pound, (of which more below).

And

shares

posted relatively small losses, with Frankfurt stocks actually rising, by 0.5%.

'Appetite for risk has shrunk'

But then these assets had already suffered heavily from the risk-off scare, while Chicago crops had been relatively resilient.

Not this time, as Chicago's benchmark July

wheat

lot tumbled 2.4% to $6.00 a bushel, a fresh closing low for the contract. Kansas hard red winter wheat fell 2.7% to $6.19 a bushel.

Corn

for July fell 2.5% to $6.07 ¼ a bushel, while

July

soybeans dropped 0.6% to $14.30 ¼ a bushel.

"Traders' appetite for risk has shrunk," grain traders at a major European commodities house said.

In the US, Paul Georgy at broker Allendale said: "The heightened political unrest in Greece and the change in governing power in France and Italy are causing a reduction in large trader participation in commodity markets.

"These events have money managers very nervous about building positions in commodities."

'Expectations are bullish'

As an extra reason for investor caution, the US Department of Agriculture will on Thursday unveil its monthly Wasde crop estimates report, which will be especially closely watched this time, including the first full forecasts for 2012-13.

In fact, much of the data is expected to be price supportive, with US soybean stocks seen remaining tight into 2012-13, after this year's disappointing South American harvests.

"New crop soybean expectations are bullish with average trade estimate for US 2012-13 ending stocks of 164m bushels," Benson Quinn Commodities said.

In fact, the new crop November lot fell nearly as much as the July contract, down 0.5% to $13.33 ½ a bushel.

Chinese 'nosing around'?

Corn too, has its supporters.

"The surprise today given the USDA numbers will be out tomorrow morning is the weakness in corn, Darrell Holaday at Country Futures said.

Especially as there is still talk of Chinese orders of US corn.

"There are strong feelings that four-to-eight additional cargoes have been purchased and [China is] nosing around for more," Mr Holaday said.

'Concern for a freeze'

Even wheat had its reasons for support.

Mike O'Dea at FCStone noted "concern for a freeze this weekend in France, Germany and Poland," while the North China Plain "sees no rain for the next two weeks.

And there are signs of demand too, with Japan and Taiwan at tender, and the broker hearing of "North African buyers in for US hard red winter wheat to replace Argentine ownership", while America's own users turn to wheat to replace corn, which is still flying in cash markets, where they can.

Benson Quinn added: "Globally, trade is eyeing dry conditions in the former Soviet Union, European Union and China, but at this time is something to be monitored."

Still the liquidation theme won out, and gained some traction in Europe too, where Paris wheat for November dropped 0.4% to E196.50 a tonne, and London wheat for the same month fell 0.7% to £148.90 a tonne.

A 5.4% jump to E228.50 a tonne in Paris's close-to-expiring May contract was seen as technically driven as, according to the European commodities house, "traders square up positions".

'Harvest looks in a bad state'

The resilient performance in sugar, however, came amid ideas that the decline in the sweetener might not have too much further to go, approaching costs of production in some areas, besides the tipping point at about 20 cents a pound when Brazilian mills will switch to turning cane into ethanol.

Standard Chartered analyst Abah Ofon recommended investors buy New York's October contract, which ended down 0.1% at 20.79 cents a pound, on the idea of a rebound of 20% or more.

And in coffee, are traders at last taking note of the continued poor conditions facing Colombian farmers?

"The market continues to ignore the plight of Colombia's arabica crop," Kona Haque at Macquarie said.

"The April-to-June mitaca harvest looks in a bad state, owing to torrential rains, which prevented flowering and increased diseases.

"The total 2012 output could fall to a 40-year low of 7m bags at this rate."

By Agrimoney.com

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