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Evening markets; sugar prices fly, corn floats, wheat sinks

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The clouds in risk markets cleared enough to allow some farm commodities to boom. But wheat was not among them, touching a six-month low.

Sugar

had a flyer, soaring 4.2% to a two-month high of 27.47 cents a pound in New York for July, lifted by improving fundamentals, with hopes for Brazil's harvest easing, and ideas of something of a virtuous, if temporary, circle of speculative buying begetting more of the same.

Nick Penney at Sucden Financial said that the basis for the weaker Brazilian expectations "seems to be that in the absence of substantial new plantings, the cane crop for next season will be affected and shortages of sugar will be felt.

"This scenario is dragging speculative and fund buying into the market once more. And the uncertainty is causing a reduction in hedging activity by producers not willing to risk a hedge on sugar they may be unable to produce."

Meanwhile, the shift against corn ethanol perks in the US is being viewed as positive for Brazil's sugar ethanol industry, which is currently disadvantaged by an import levy which looks in the firing line if political sands in Washington keep moving.

London white sugar for August added 1.9% to $739.60 a tonne.

Rain hopes fade

Cotton

had a firm day too, at least in the old-crop July contract, which closed up 2.5% at 148.73 cents a pound on a rally attributed to short-covering in an absence of physical cotton to meet orders, while dry weather continues to test this year's US crop.

New crop cotton for December added a more modest 0.2% to 124.07 cents a pound, helped by the withdrawal of rain for forecasts for drought-struck Texas.

"Models still show significant showers and thunderstorms for the coastal areas of Texas and the Mississippi Delta, but it is not nearly as impressive with the rainfall amounts or the coverage when compared to what the data was showing last week," weather service WxRIsk.com said.

But, in Chicago, Darrell Holaday put the overall mood so: "These markets destroyed several areas of technical support last week and are looking for some new market information to spark some buying.

"That is really not happening at this point. Therefore, the path of least resistance is lower."

'Over 1m hectares under water'

It wasn't quite true that there was no new information with, for instance, the worst flooding in 20 years in Zhejiang and Hubei and China.

Matthew Pierce at PitGuru said: "Over 1m hectares are currently under water with more expected following more rains this week. This is the opposite of the north central plains which missed much needed rains this weekend with no real chance seen this week."

Argentina lowered its

wheat

sowings by some 300,000 hectares due to a dry spring, while there is no end in sight for the rains which have made a big dent in spring wheat sowings in the northern US and, especially, Canada's Prairies.

Mr Pierce pegged total area losses in North Dakota at 1m-2m acres, and in Canada at 10m-15m acres, although more will be known on Tuesday when Statistics Canada unveils an official estimate.

That said, "like the US Department of Agriculture, Canada will likely move slowly showing the drops in total planted acreage", meaning the estimate may well prove conservative, he added.

'We are at value'

Then there were some buying activity too, with Saudi Arabia purchasing 360,000 tonnes of wheat from Europe and the US over the weekend, and Jordan tendering on Monday for 100,000 tonnes of hard wheat.

"World buyers apparently believe we are at value," US Commodities said.

"Saudi Arabia bought wheat. South Korea, Japan, Egypt and Israel all purchased

corn

," with the broker also noting talk that China bought up to 10 cargoes of South American

soybeans

too.

'Unexpected surprise'

But for wheat, all this, and a fallback in the dollar towards unchanged levels, failed to counteract pressure from the US harvest, reports of decent grains crop in Ukraine and better prospects for European wheat following rains.

Chicago's July contract closed down 1.9% at $6.59 ¼ a bushel, having touched $6.54 ¼ a bushel earlier, the lowest for a spot lot since the start of December.

Paris wheat for November eased 0.6% to E211.75 a tonne, with London's November lot losing 1.2% to £172.40 a tonne.

"With very limited first-hand selling still apparent, many growers are going to get an unexpected surprise [can there be any other type?] when they next come to look at marketing wheat with London's November wheat futures now over £27 a tonne off the top in less than three weeks," the UK grain arm of a major European commodities house said,

It added that the "slide in prices will be partly offset by better yield prospects".

'Hotter and drier pattern'

Corn did better, helped by the buying activity and with a bit of weather premium being reinjected, given continued flooding around the Missouri river, and the potential for uncomfortably warm weather ahead.

"More and more model data is showing a hotter and drier pattern developing for the long July 4 weekend," WxRisk.com said.

"Basically the entire jet stream shifts to the north, and stays north of the US-Canada border. Not all the model data agrees with this sort of extreme scenario but they all show a hotter and drier pattern developing."

Corn for July closed up 0.25 cents at $7.00 ½ a bushel, with the new crop December lot up 0.5 cents at $6.60 ½ a bushel.

Soybeans added 0.2% to $13.35 ¾ a bushel for July, getting some support from the idea that China might be back in the market, as well as from the reinjection of a touch of weather premium, and of the continuing damp woes affecting Canada's sowings of rival oilseed canola.

By Agrimoney.com

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