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Evening markets: month-end blues dent softs, but not grains

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The idea of end-of-the-month weakness in agricultural commodities was fulfilled in many soft commodities. But not in grains.

Cocoa

suffered a reversal of the type that many investors expect at month end, a time when funds by repute sell-down positions to raise cash for meeting the likes of investor liquidation.

New York's July contract slumped 7% at one stage before recovering some ground to end at $2,219 a tonne, a fall of 3.9%.

The plunge was seen as following a pattern of occasional volatility of late, but technically fuelled, with falls below a clutch of key chart points, such as the 100-day, 50-day, 20-day and 10-day moving average lines the bean surrendered. (It had regained the 20-day by the close.)

However, there was also a hint of commercial selling. "Producers have used signs of strength to sell into recently," Macquarie analyst Kona Haque told Agrimoney.com.

Stops not there

New York

orange juice

also had a dismal day, finishing 4.2% lower at 141.85 cents a pound for July delivery, the contract's lowest close in more than two years, on what was attributed to end-of-month liquidation.

There was more fundamental reason behind the 2.0% drop to 89.40 cents a pound in July

cotton

, after India, the second-ranked producer, lifted its export ban, and rain improved conditions for crops in Texas, the top US cotton-producing state.

Against that backdrop, New York raw

sugar

did relatively well to end down 0.4% at 21.12 cents a pound for the July lot, amid some ideas of bearish pressure running dry at lower levels.

"We were expecting decent sized stops below 21 cents a pound, and it seemed there really wasn't anything majorly substantial set off," Thomas Kujawa at Sucden Financial said.

'Strong possibility of profit-taking'

But in Chicago, grains managed to recover their poise, after earlier looking headed for negative closes.

And after all, there is plenty of talk about

soybeans

being ripe for a fall, given speculators' record net long in the oilseed – a position which will, at some point, require unwinding.

Even Rabobank, forecasting soybean prices would test record highs above $16 a bushel, flagged the speculative positioning as "downside risk" to its projection.

Benson Quinn Commodities said: "There is a strong possibility of profit-taking developing in the soybean market on any sign of weakness."

'Negative tilt'

And bears appeared only to have been given succour by unexpected deliveries against the expiring May contract, of 752 lots, plus 3,392 lots in

soyoil

– deliveries implying that futures offer a better exit route for producers than cash markets.

Paul Georgy at Allendale said: "Deliveries were a surprise for traders as many were expecting no deliveries in soybeans and

corn

," and indeed got none in corn.

The deliveries "likely offered a negative tilt" to the market, Benson Quinn added.

'Dramatically overbought'

But the oilseed has points in its favour too, including a further sale to China, of 220,000 tonnes, and continued downgrades to the Argentine crop, the most dramatic of late being Friday's 5.0m-tonne cut to 40.0m tonnes by Informa.

Furthermore, while "technically beans remain dramatically overbought, there are no distinct chart signals that say the ride is over", GrainAnalyst trader Matt Pierce said.

"Momentum still lies with bulls."

The oilseed closed up 0.4% at $15.03 a bushel for May delivery, the first close above $15 a bushel for a spot contract since 2008, while the July contract gained 0.7% to $15.05 ½ a bushel, regaining a premium, as would be typical.

'Caught the market by surprise'

Wheat

, meanwhile, suffered from an unexpected delivery too, of 1,000 lots against the Kansas hard red winter wheat lot for May.

"Gavilon put them out in Wichita. This caught the market by surprise," FCStone noted.

Furthermore, there were the improved production prospects from heavy weekend rains in US hard red winter country to factor in.

"Violent thunderstorms broke out Sunday, producing heavy rainfall in Kansas and northern Oklahoma, leading US bread-wheat states," Gail Martell at Martell Crop Projections said.

"Wheat is heading out and filling grain, so generous rain is very beneficial."

Darrell Holaday, at Country Futueres, said: "The biggest risk to southern Kansas and Oklahoma may end up being too much rain. But so far the timing of the moisture has been excellent."

'Drought starting to develop'

However, the weather was not all so hunky dory for wheat crops.

Ms Martell noted that "dryness is worsening" in spring wheat states, such as North Dakota.

And the weather problems in Argentine, better known for hurting corn and soybeans, as autumn-sown crops, are now affecting wheat too, with conditions "too cold and dry" for planting wheat in Buenos Aires state.

She said: "Freezing temperatures have developed in the past week in Buenos Aires and La Pampa. Drought is starting to develop in Buenos Aires, the top wheat province, where rainfall has been below average for at least 30 days."

Furthermore, "there is a chance that a ridge of hot/dry weather could form in portions of the Black Sea region as the crop reaches key development stages", Benson Quinn Commodities said.

Prices rise

Hard red winter wheat, of which more will be known following a much-watched crop tour this week, added 0.5% to $6.62 a bushel in Kansas.

Minneapolis spring wheat for July gained 0.6% to $7.83 ½ a bushel.

Still, Chicago wheat did better still, helped by zero deliveries when there had been expectations of some, and added 0.7% to $6.54 ½ a bushel for July.

That said, Paris wheat for May did better, soaring 1.3% to E216.50 a tonne, playing a little catch up from Friday, when it closed too early to benefit from the fullness of the spike in Chicago values.

'Now just average'

Even that performance was not enough to keep up with Chicago corn, which closed 1.5% higher at $6.34 ¼ a bushel for the best-traded July contract, reducing a little its unusual premium against the May lot, which finished up 1.1% at $6.60 ¼ a bushel.

The grain gained some continued support from Friday's huge Chinese orders, making it the best day for US corn export sales in 20 years.

Also, the idea of rapid spring sowings, and the higher yields it might encourage, are waning, with dryness slowing plantings in Iowa, the biggest US corn-producing state.

"The trade was at one point hopeful corn planting would be 80% complete by May 1. The record fast pace is now just average," US Commodities said.

Furthermore, the US Drought Monitor is highlighting areas of "abnormal dryness" in the eastern Midwest.

By Agrimoney.com

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