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Evening markets: grains rally stalls, despite EU wheat fears

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Just how bad is Europe's wheat crop going to be?

The International Grains Council pegged it yesterday at 141.1m tonnes, all

wheat

. A poll by Bloomberg came in with some figures below 130 tonnes, also including durum.

Anyway, it is a matter ramping up in importance on US markets, not just because of the knock-on impact on world wheat trade (with some talking of Europe being wiped off the wheat export map in 2011-12) but on rumour of actual impact already.

'Most explosive situation'

Darren Dohme at Powerline Group reported "ideas now that the European Union will import US corn" as a feed substitute. Agrimoney.com had heard rumour of Spain buying 1m tonnes.

At PitGuru, Matthew Pierce reported talk of big plays in [call] options against Chicago wheat.

"Rumour has it that this is coming from EU origination making this a fear play following their recent shift to hot and dry weather," he said.

"If this is true, their problems are likely bigger than markets have heard, making wheat the most explosive situation on the floor.

"With problems in Europe, Russia, China, Canada and the US, the world is getting a bit worried over the availability and quality of wheat come this fall."

'Early to be bullish'

Such talk, coupled with a weaker

dollar

- which has signally reverted to falling on weak US data, rather than appreciating on the US-problems-are-global-problems trade – helped stop the expected end-of-week profit taking turning into a drubbing. At least, with an hour or so's trading to go.

But it could not prevent wheat bouncing increasingly into negative territory, what, with the end of the month ahead, and a long weekend, with Monday a US holiday (besides in the UK too).

After all, it could be a momentous weekend, given that dealers are expecting imminently a decision from Russia on whether it is to lift its export ban. And Russia has a habit of timing significant events while the West is on holiday, (eg President Gorbachev's resignation on Christmas day 1991).

"As soon as it is clear that the export ban in Russia is not to be extended but will expire as planned on July 1, [grain] prices should pare their recent gains," Commerzbank said.

Furthermore, how bad really is the weather for US corn and soybeans, now that hotter weather is on its way next week?

"With the recent rains, I was always taught that rain and heat make grain. It feels a little early to get bullish due to heat," Jerry Stowell at Country Futures said.

One extreme to the other?

Sure, many others had a different view.

"If the warm and dry weather pattern extends into the middle of June, it is almost certain that flood worries turn quickly to drought worries," US Commodities said.

And, weather prospects for Europe "look drier than yesterday", the broker added, although WxRisk.com reported clashes in outlooks provided by different weather models.

Whatever, even Minneapolis spring wheat, the market's darling of late given the wet delays to US and Canadian sowings of the grain, stood lower in late deals. The July lot eased 0.1% to $10.45 ¾ a bushel, with the September contract down 0.7% at $10.22 a bushel.

Kansas wheat was up 0.1% at $9.44 a bushel for July, but down a smidgen for September, with the Chicago July lot gaining 0.3% to $8.16 ½ a bushel.

Rapeseed's run continues

And with the market leader struggling,

corn

fell back from its earlier highs too, standing at $7.51 ½ a bushel for July, up 0.8% on the day, while the new crop December lot was 0.3% up at $6.78 ¼ a bushel.

The gains were said to be being boosted by the unwinding of some long wheat, short corn spreads.

Soybeans

succumbed altogether, shedding 0.5% to $13.84 ¾ a bushel for July.

Not that this could stop rival oilseed

rapeseed

continuing its winning run in Paris, chalking up an 11th successive positive close , up 0.7% to E494.00 a tonne for August, on fears for the impact of dry weather on Europe's harvest.

And this despite the stronger euro which pressed on Paris wheat, which closed 0.8% lower at E251.00 a tonne for November. London's November lot shed 0.8% to £197.00 a tonne.

Roasters sated

The weaker

dollar

helped some soft commodities too, with raw

sugar

up 1.5% at 23.03 cents a pound in late deals in New York.

But it could not prevent a drop of 0.9% to 263.30 cents a pound in New York

coffee

for July.

"What is troubling to me is the lack of volume" Jurgens Bauer at PitGuru said.

"I also hear tell that some roasters acquired significant contracts on an aggressive anticipatory hedge a few weeks back, which means traders cannot expect strong support from roasters on a move lower."

And cocoa extended a run south, losing 1.4% to $2,968 a tonne in New York, just after Agrimoney.com highlighted analysts warnings of pressure from growing supplies.

By Agrimoney.com

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