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Evening markets: photos trump figures to send grains soaring

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Sometimes, a picture can be worth 1,000 buy orders.

Mike Mawdsley, at Market 1, mused early on - after US Department of Agriculture surprised investors by saying that the US corn crop did not deteriorate overall during last week's heat – that photographs might offer opposing evidence.

"Pictures of less-than-ideal looking corn ears will be seen by many as producers post pictures on the internet," Mr Mawdsley said.

Within hours, such photos were being seen as fuelling a buying spree which sent grains soaring, even on a poor day for other risk assets.

"Field tours are out looking at corn and e-mails are floating around with pictures of corn tipped back in parts of Illinois, Indian and eastern Iowa," Darrell Holaday at Country Futures said.

"The panic has set in again in the corn market and that is impacting the entire grain complex."

'More and more concern'

The trouble was that while the USDA data showed the headline corn crop staying at 62% "good" or "excellent" in the week to Sunday, the state-by-state breakdown showed big drops in condition in major producing states.

These were, for reasons explained elsewhere on Agrimoney.com, not reflected in the headline figure.

However, analysts had the gumption to make their own recalculations, with Matthew Pierce at PitGuru, for instance, saying that "the weighted breakdown, taking acreage into consideration, shows a 2-point-plus decline".

There is "more and more concern about heat stress and disappointing yields", Mr Holaday said, even if weather forecasts were actually looking slightly improved, from a growers' perspective.

"The August weather however looks wetter and more normal," US Commodities said.

WxRisk.com said that the midday GFS weather model "shows no hint of any significant or sustained heat pushing back into the upper Plains or the Midwest in the six-to-10 day or the 11-to-15 day timespans".

Fund buying spree

The result was a late burst which took December corn from a little under $7 a bushel in midday deals Chicago time to $7.11 ¼ a bushel by the close a little over an hour later, up more than 4% on the day.

Funds bought an estimated 23,000 lots, despite some scepticism from analysts that high prices were justified.

"A year ago the [corn] price rallied from $4 a bushel to $7 a bushel as the crop shrank in the US and around the world. We are now at $7 a bushel with cheap Black Sea

wheat

and a slower world economy," US Commodities said.

In fact, wheat - for which USDA data had showed a (four-point) decline in the proportion of the American spring crop rated good or excellent – did even better.

Chicago's September contract soared 6.1% to close at $7.18 a bushel, its highest finish for more than a month, and not without provoking some scepticism at its lofty finish.

Chinese roll

The rise came too late to prevent European wheat easing precisely on concerns over Black Sea competition, plus the weight of supplies from a harvest progressing at a better pace in northern France.

Paris wheat for November dropped 1.0% to E195.50 a tonne, while London's November lot closed down 1.5% at £161.00 a tonne, despite the dollar making ground against other currencies, and so making US exports such as grains a little less competitive.

However, it enabled Chicago

soybeans

to recover despite getting an early knock from the shift by China of an order for 550,000 tonnes of US soybeans into 2011-12 from the current crop year.

"That pressured soybean until about 11am when corn when sharply higher," Mr Holaday said.

The oilseed ended up 1.3% at $13.79 ¾ a bushel for November delivery.

'Correction mode'

In New York,

cotton

ended higher too, pulling off another of its recoveries from a weak opening to close higher, up 1.7% at 106.85 cents a pound for December delivery.

Besides the forecast not looking so wet for drought-stricken Texas, which produces about half US cotton, technically, "the market seems intent on working off its bullish divergence", Keith Brown at Georgia-based broker Keith Brown & Co said.

But some other soft commodities took greater notice of the poor day for external markets which saw Wall Street shares down 1.4% in late deals, with West Texas Intermediate crude down 1.3% at $93.63 a barrel.

Raw

sugar

dipped 2.8% to close at 28.16 cents a pound in New York for October delivery, the lowest for nearly a month.

"With the macro picture not helping, sugar is in correction mode," Nick Penney at Sucden Financial said, adding that while "eyes are still on Brazil's Center South crop, the competition for who comes up with the lowest forecast seems to have abated".

Indeed, the latest downgrade, from USDA attaches, of a cane crop of 530m tonnes was above some other recent estimates.

By Agrimoney.com

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