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Evening markets: weather's benign turn damns grain prices

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Grains, which had begun the day in slumber mood, fell painfully out of bed.

Wheat

and

corn

lost 4% at one point in Chicago before paring a hundful of their losses towards the close.

They were no match for

soybeans

, a crop viewed as less favoured by a monthly set of US Department of Agriculture data on Monday, but which managed to pull itself together this time to close a modest 0.3% lower at $13.91 ½ a bushel for Chicago's benchmark November contract.

And there was little to blame external markets for, with

shares

graining on both sides of the Atlantic, the

dollar

tumbling 0.8%, boosting the appeal of dollar-denominated assets such as New York

crude

, up 2% in late deals, while

copper

closed a little higher in London.

'Crop has stabilised'

Grains' problem was corn's modest reaction in the last session to, ostensibly, helpful USDA estimates.

"Many people had gone long by purchasing call options. The lack of follow through after the report has prompted a lot of liquidation of those positions," Darrell Holaday at Country Futures said.

Meanwhile, data overnight showed a surprise uptick, albeit of only one point, to 53% in the proportion of the US corn crop rated "good" or "excellent".

"This indicates the crop has stabilised," US Commodities said.

And there is less prospect of deterioration ahead with fears over an early frost receding.

"The possible frost/freeze event for Wednesday/Thursday that was advertised to dip into northern Iowa, Illinois and Indiana yesterday was pulled northward in latest weather models," Benson Quinn Commodities said.

"It is expected to impact a much smaller portion of the soybean belt from northern North Dakota, northern Minnesota and Wisconsin." Note, the soybean belt rather than the Corn Belt too.

Rains on the Plains

Furthermore, at PitGuru, Matthew Pierce highlighted that, later in the week, weather "will shift to above-normal temperatures with almost no rain forecasted. This will speed up corn harvest".

And, as if the elements hadn't done bears enough favours, ideas of much-needed, and timely, rains for southern Plains farmers attempting sowings of hard red winter wheat added to weakness in the grains complex.

"Rain forecasts for the southern Plains have led to additional selling in wheat," Country Futures' Mr Holaday said.

"The models are pointing to 1 inch rainfall amounts in southwest Kansas, western Oklahoma and west Texas over the next two days."

Spreads unwound

And if that wasn't enough for sellers, Australian officials kicked in by raising their estimate for wheat exports from the southern hemisphere's top exporter of the grain by 300,000 tonnes to a record 20.4m tonnes.

There was plenty to question in that estimate – an improvement year on year despite growing competition from Black Sea shippers this time, besides reflecting an upbeat crop estimate.

And, sure, bulls had some scraps to pick on, such as a Syrian wheat tender (Egypt's latest tender was revealed after the close of markets) and overly cold weather in China.

"We have an early frost threat in [China's] north east affecting both late developing corn and maturing soybeans," Mr Pierce said.

But it was meagre fare. Especially with, as Mr Holaday noted, investors unwinding long corn, short soybean spreads" that were put on yesterday, as that spread went way too far" in the last session.

Corn ended down 3.0% at $7.23 a bushel for December delivery, even so managing to expand its atypical premium over wheat, which shed 3.5% to $7.02 a bushel for December.

'Production is an issue'

Cotton

did better at maintaining its bullish attractions, adding 0.6% to 113.01 cents a pound in New York, for December delivery, as investors continued to question whether fundamentals for the fibre were as bearish as had been perceived.

"Production is an issue while demand is obvious and growing," Mr Pierce said, with traders also attesting to the fibre's attractive chart pattern.

And

cocoa

managed to put an end to its descent, for now anyway, adding $2 to close at $2,865 a tonne in New York, for December, only the lot's second positive finish this month. The bean has been hit by better hopes for supplies, with

'Volatile movement'

Meanwhile,

sugar

displayed more of the instability which, in the last session, was marked by an unusually large spread between front and second-in contracts, both for New York raw sugar and London white sugar, and has been associated with the expiry of options. (Cf coffee last week.)

"With New York options expiry on Thursday, and the imposition of position limits thereafter going into the expiry period, the front spread is still subject to volatile movement as sizeable trades take place to square books," Nick Penney at Sucden Financial said.

"With rumoured buy-backs by millers, and the lowering of estimates for deliveries against the October contract of Philippine sugar, the pot will continue to bubble."

The spread actually widened this time, with New York's October lot closing down 0.5% at 29.41 cents a pound, while the March lot shed 0.8% to 27.96 cents a pound.

In London, the gap did close, with October white sugar shedding 3.4% to $747.00 a tonne, and the December lot closing down 0.9% at $717.30 a tonne.

By Agrimoney.com

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