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Evening markets: new crop contracts win. Old crop lots lose

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In the end, broader financial market conditions and meteorological ones ended pretty evenly balanced.

Grains made a decent stab at avoiding the turbulence following a cut to "negative", from "stable", by Standard & Poor's to its outlook on Italy's sovereign credit rating, dragging another country into the eurozone debt debacle which has already swallowed Greece, Ireland, Portugal and, to a lesser extent, Spain.

(Soft commodities were not so resilient, with New York

sugar

spending all the day in negative territory before closing down 4.0%.)

Weak economic data from China, showing factory activity growing at its slowest pace in 10 months, added to the financial market gloom which sent Frankfurt shares down 2.0%, and London stocks 1.9% lower, with Wall Street shares also down 1% plus in late deals.

Dollar factor

But the protection afforded to grains by the dismal weather did not prove strong enough to counter completely the negative headwinds, which also included a 0.9% rise in the

dollar

as investors scrambled for the safety of the greenback.

A stronger dollar is a depressant for prices of dollar-denominated assets such as many commodities as it makes them less competitive as exports.

And, indeed,

oil

proved incapable to hold a rally which drove it back over $100 a barrel at one stage, retreating to $97.66 a barrel in late deals, down 2.4% on the day.

Copper

dropped more than 3%, with the CRB commodities index overall shedding 1.3% and taking its fall from its early-May high above 9%.

More rain

This broader weakness in the end claimed old crop contracts in Chicago, with July

wheat

ending down 0.4% at $8.03 a bushel,

corn

for the same month losing 0.7% to $7.54 a bushel, and

soybeans

shedding 0.5% to $13.73 ¾ a bushel.

"The reality is that grains would likely be significantly higher if it were not for the pressure in the outside markets," Darrell Holaday at Country Futures said.

Still, new crop contracts were protected by the poor weather outlook, with September wheat adding 0.2% to $8.50 ½ a bushel, December corn closing 0.6% higher at $6.70 ½ a bushel and November soybeans edging 0.25 cents higher to $13.50 ¾ a bushel.

The latest weather forecasts show "a system moving across Missouri, Illinois, Indiana and Ohio with amounts estimated from three to five inches", Benson Quinn Commodities said, relating obviously poor news for spring crop sowings.

"Northern Plain states will turn drier but will need that time to dry out after heavy weekend rains," the broker added, in a nod to spring wheat planting prospects.

As for soft red winter wheat, its prospects are also being hit by the wet weather. "It is heading and standing in water," US Commodities said.

'No significant showers'

US futures prices are getting increasing help from abroad too, with alarms now sounding for Brazil's parched winter corn crop, and continuing to ring for those in Europe and, increasingly, the former Soviet Union.

Forecasts of European rain from one model were now "clearly weaker", WxRisk.com said.

"In fact, the model has no significant showers and thunderstorms with this front as it moves through France and Germany, and any shower thunderstorm activity is to wait until the front crosses into northern Italy, Austria, and Poland on May 27 and 28."

And another, GFS model was in the six-to-10 day outlook "extremely dry across all of France Germany and Poland into the Baltic region with rainfall amounts of only 10-25% of normal", the weather service said.

"It's also very dry across the Ukraine and most of western Russia. Amazingly in the 11-to-15 day this dryness continues in all areas across the Ukraine western Russia [and] eastern, central and western Europe."

Still, wheat for November edged 0.1% lower to E244.50 a tonne, despite help from a weaker euro on top, with London's November contract losing 0.3% to £193.50 a tonne.

'Trending nicely'

Among soft commodities,

sugar

was the worst hit, ending down 4.0% at 21.51 cents a pound in New York, as talk of growing supplies won out.

"The general sentiment from the New York Sugar Week it seemed was bearish for this campaign," Thomas Kujawa at Sucden Financial said.

"It was hard to find a medium-to-long term bull. The fundamental analysts seem to be revising their figures to a larger surplus and so seem to be trending nicely for the bears."

Egypt cancelled a tender for 50,000 tonnes of raw sugar, adding to the downbeat mood.

'Technically vulnerable'

Cocoa

closed at a four-month low in New York of $2,865 a tonne, for July delivery, down 1.3%, amid continuing talk of shipments leaving Ivory Coast, following the lifting of an export ban.

Jurgens Bauer at PitGuru said: "There is news of a threat to South American crops. Frosty pod rot, spread by spores carried by wind and human contact, which is a supply side story making the rounds.

"However, supply is also reportedly increasing from West Africa now that Ivory Coast shipments are resumed."

Besides, technically cocoa futures "fell below key support" in the last session "and technically look vulnerable to a further push".

Data later

Back to grains and, for the overnight session, direction may depend on the outcome of the US Department of Agriculture's latest crop report, due imminently, and expected to show corn sowings hitting 80-83%, soybean plantings at 40-43% and spring wheat about 55-59% seeded.

The report is also expected to reveal the first condition ratings of the corn crop.

By Agrimoney.com

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