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Evening markets: wheat futures soar as crops regain allure

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Not even Greece could prevent a sweep of blue returning to commodity price boards on Monday, with grains notable among the winners.

The debt-stricken eurozone country did its best to spoil the party, thanks to (another) downgrade of its credit rating by Standard & Poor's, by two notches to B – well into "junk" territory - amid growing talk that Greece will restructure its borrowings.

That was enough to keep many markets in check.

But crucially, it failed to provoke more strength in the

dollar

, which stood 0.2% lower against a basket of currencies in late deals, improving the attractions of dollar-denominated assets, such as many raw materials.

'Not fundamentally warranted'

Oil

bolstered confidence among commodity investors by jumping more than 5%, back above $102 a barrel for New York crude, and above $115 for Brent.

Among farm commodities, that helped a round of profit-taking by those fortunate enough to witness last week's slump with short positions, and bottom-picking by others.

"The lack of liquidation has brought in some bargain hunters looking to grab perceived value," Darrell Holaday at Country Futures said.

Sudakshina Unnikrishnan at Barclays Capital said: "Last week's price declines were not fundamentally warranted, in our view, driven by risk reduction, a stronger dollar and choppy external markets."

What alternative?

There was also the question of where else investors should put their money?

"While we're sure some capital found its way back out of the market last week, what other better/safer/smoother alternative investment vehicle does it have to go to?" Darren Dohme at Powerline Group said.

"Stocks and equities are fine, but they show nearly the same price volatility as commodities with lesser returns since the 2008 recession."

Meanwhile, bond yields are hardly generous, and cash hardly an ideal option either.

"Investment managers can only keep funds on the sidelines for so long before they start to lose purchasing power in an environment where inflation rates are higher than interest rates".

Weather list

Whatever, the broader conditions played to an agricultural commodities market where weather concerns are still very real, with wet weather delaying sowings of many North American spring crops, and dryness a concern in Europe, China and parts of the former Soviet Union.

US Commodities listed the outlook so: "The heat in the [US] south west Plains and the cool/wet weather in the nothern Plains and far east and south east Corn Belt is supporting the market.

"A slow moving system is expected to provide cool/wetter weather to the Corn Belt later this week. Europe and Central China are also warmer and drier. Canada is cooler/wetter."

'Heavy snow thaw'

Indeed, the Canadian province of Alberta is "seeing long planting delays due to heavy snow thaw", the UK's Home Grown Cereals Authority reported.

"Less than 1% of crops are in the ground compared to a five-year average of 15%."

Back in the US, "heat across the southern Plains is a threat for hard red winter

wheat

, while flooding in the southern Midwest threatens soft red winter wheat", Benson Quinn Commodities said.

Mr Holaday said: "After spending the end of the week looking at Kansas wheat, I feel the Kansas crop could easily dip to the 225m-bushel level."

Sweet for wheat

So wheat, for which few main producing countries appear blessed with benign weather, led the rebound for agricultural commodities, jumping 4.1% to $7.90 ½ a bushel for July delivery in Chicago, which trades the soft red winter variety.

Kansas hard red winter wheat gained 4.6% to $9.14 ½ a bushel, with the Minneapolis July spring wheat lot gaining 4.5% to $9.44 ¾ a bushel.

Still, even that was put in the shade by Paris wheat, which witnessed a 17% jump in its (relatively thinly-traded) July contract at one point, fuelled by local and world weather concerns, coupled with panic short-covering.

The best-traded November lot closed up 6.2% at E226.00 a tonne. In London, the May lot added 2.4% to £202.75 a tonne, with the November contract jumping 5.3% to £177.75 a tonne.

'Huge progress'

Back in Chicago,

corn

gained 3.1% to $7.07 ½ a bushel for July, still feeling some effect from the prospects of a larger sowings number in US Department of Agriculture crop progress data due later.

Better weather in many districts has helped farmers after a wet-delayed start, which saw only 13% of sowings completed as of Sunday last week.

"Planting progress this afternoon on the US corn is expected to be 35%-38% complete. It is the western Corn Belt that made huge progress the past six days," US Commodities said.

Soybeans

remained a follower to the rest of the market, ending 0.7% higher at $13.35 a bushel for July.

India expectations

Soft commodities ended largely firm too, although with nowhere near the alacrity of grains, lacking in the main the immediate fundamental concerns.

Sugar

was one exception, helped in part by talk of growing queues of ships waiting to load up in Brazil, the top exporting country, where logistical delays played a big part in reviving prices last year.

Furthermore, there is talk that India will not, after all, export any additional sugar, beyond the 500,000 tonnes recently permitted, thanks to output in Maharashtra and Uttar Pradesh looking like falling behind earlier forecasts.

New York sugar for July added 2.4% to 20.96 cents a pound.

Lost fizz

However, New York

cocoa

for July traded flat at $3,082 a tonne, as Ivory Coast resumes exports, while Ghana lifted its target for cocoa purchases, to a large extent a proxy for production, by 70,000 tonnes to 920,000 tonnes.

And July

coffee

lost early gains to close down 0.15 cents at $287.40 cents a pound, amid talk that Brazil is poised to begin a sell-down of state inventories.

By Agrimoney.com

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