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Evening markets: wheat leads grains higher

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Short covering continued to boost wheat, with a regulatory twist adding further spice, as crops closed Thursday on better form than they started.

Some traders had feared the worst for Chicago crops, after a slump in oil fuelled by data showing surprisingly high US crude inventories. November New York crude stood 4.4% lower at $65.94 a barrel at 17:15 GMT.

Oil is a key indicator for food commodities, many of which, such as corn and wheat, have alternative uses as biofuels.

That wasn't the only headwind against wheat, which also faced a 4m-tonne upgrade from the International Grains Council in production forecasts.

'Unacceptable to hedgers'

Meanwhile, the Commodity Futures Trading Commission, the market regulator, recommended using variable storage rates as a way of promoting convergence between futures and cash prices in wheat.

"The wheat contract in Chicago has not been converging for the last couple of years," Vic Lespinasse at GrainAnalyst.com, said.

"For example, when Sep wheat expired recently, the cash price in Toledo, one of the key delivery points, was about 70 cents [a bushel] under the September futures price.

"This is unacceptable to hedgers and the CFTC, who has vowed to fix the problem."

The proposal involves adding about 3 cents a month to wheat storage costs, a charge reflected in market prices by a widening in the premium later contracts have over earlier ones.

With investors continuing to climb back into wheat, after selling pressure dried up, this meant that while the near-term December contract added 2.8% to $4.73 a bushel, July 2010 closed up 3.1% at $5.19 ¼ a bushel.

Soybean exports

Corn ended higher too, up 6.25 cents at $3.36 ½ a bushel for December delivery, helped in part by wheat and also by the return of frost concerns.

However, soybeans ended lower, down 1 cent at $9.19 ½ bushel, despite weekly export sales of a whopping 1.15m tonnes, of which 655,000 tonnes went to China.

The crop looks more mature than corn, certainly, so less prone to frost damage. But traders also cited technical reasons for the decline, with prices charts appearing bearish to some.

By Agrimoney.com

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