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Evening markets: wheat price slips on rain, France, Ukraine

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The

wheat

,

copper

divorce thing that Agrimoney highlighted earlier – that is, the notable lack of a tie between the two commodities which might have been expected in choppy markets – well, it only got worse.

London copper added 2% on Friday to close up nearly 5% for the week, its best weekly performance since April.

Chicago wheat for December closed at $6.07 ½ a bushel, to end the session down 1.4%, and the week fractionally lower.

But then the jitters ahead of fresh monthly US Department of Agriculture estimates due on Wednesday were not the only reason for wheat to underperform.

'Definitely a little bearish'

First, Ukraine's parliament ditched export duties on wheat, and corn, shipments, bringing a fierce price competitor back in earnest onto international markets.

"Corn and wheat have been plagued today by the announcement by Ukraine that they would drop the corn and wheat export tariffs. Definitely a little bearish for price," Darrell Holaday at Country Futures said.

Then France's farm ministry upped its estimate for the domestic soft wheat harvest, and by 600,000 tonnes to 34.1m tonnes, a sizeable upgrade for monthly data this late in the season.

(Only on Thursday, Brussels-based industry group Coceral pegged the crop at 33.45, tonnes.)

Nearly one foot of rain on its way?

And this against a backdrop of not just rains for drought-stricken hard red winter wheat regions in the US South, but downpours, which look enough to make a difference when farmers are praying for moisture to sow the grain.

"Weather models are increasing the rains coming in for the lower and central Plains," weather service WxRisk.com said.

One model is, over the next three days, seeing "almost eight inches of rain in far south western Oklahoma and a large area of four-to-five inches covering portions of north central Texas and all of western Oklahoma".

Another, the popular GFS, is showing "rainfall amounts greater than 11 inches".

'Biggest short on record'

Besides, and perhaps not surprisingly, there are ideas that speculators have not been so keen after all to take profits on short positions, which reached historically high proportions as of Tuesday last week, according to the last set of US regulatory data.

"Investment funds have not abandoned the wheat futures markets by any means," the UK grain arm of a major commodities group said.

"The problem is that they are now selling, not buying. It is thought that non-commercial investors now have the biggest short position on the Chicago futures on record."

We shall discover later on Friday.

'More frost/freeze damage'

Whatever,

corn

felt pressure from wheat's weakness, besides the pressure of Ukraine's decision too.

Ukraine is on its way to a record corn harvest to splurge onto export markets.

There is also the US harvest to consider, being speeded by dry weather further north from the Texas inundations, if not necessarily quite as resilient in yield terms as some reports have suggested.

US Commodities said it was "confirming more frost/freeze damage than earlier reported".

"This is hurting both corn and

soybean

yields in the northern part of the growing area," the broker said, adding that yields looked a touch disappointing in the eastern Corn Belt, but better in the western Corn Belt.

Corn for December fell 0.9% to $6.00 a bushel, leaving soybeans for once the bet of a weak bunch, losing 0.5% to $11.58 ¼ a bushel for November.

Texas downgrade?

In fact, it was not as commodity-friendly a day as copper's performance might suggest, with further upbeat US jobs data offset by a swathe of downgrades by ratings agencies to countries (Italy and Spain by Fitch) and banks (Portuguese and UK) by Moody's.

And

cotton

, historically more sensitive to economic sentiment, as an industrial rather than food commodity, lost 0.7% to 101.98 cents a pound in New York.

This despite expectations that next week's USDA reports will cut estimates for cotton production in Texas

Jurgens Bauer at PitGuru said: "We may not see drama, but the Texas cotton crop back in September was [estimated at] 4.2m bales. In 2010, it was 7.8m bales.

"This year sources suggest strongly that it will be closer to 3.2m bales."

'Limited downside potential'

Coffee

had a stinker in New York, tumbling 4.3% to 224.35 cents a pound for December delivery in what was considered largely technical trading, and with ideas that Vietnam may not suffer supply hiccups as talked about on Thursday.

New York raw

sugar

did better, adding 2.1% to 25.16 cents a pound for March delivery, amid ideas that non-commercial investors were done selling for now.

"Long covering is likely to wane now, and while speculator selling could increase modestly we expect the net long position to have only limited downside potential given the risks in production and the tight supply," Rabobank said.

"The managed money net long position is small a very close to being the lowest level since the middle of the financial crisis."

By Agrimoney.com

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