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Evening markets: wheat slips on ideas of ease in freeze

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What goes up must come down.


, after soaring more than 15% from its January 18 trough to the last session's high, fell back on Thursday from four-month highs.

Set against the grain on Thursday were ideas of the freeze in the former Soviet Union and the European Union, which has raised fears for winterkill, relaxing its grip.

Official forecasters in Russia said that western areas, set to see temperatures 10-15 degrees normal for the rest of the week, forecast that February overall not suffer an unusually chill February.

Indeed, "this morning's weather forecast is for moderating temperatures for the region [including Europe] next week with some areas receiving snows to protect winter crops", Benson Quinn Commodities said.

Rival broker US Commodities said: "The cold temperatures in Eastern Europe and Russia are forecast to moderate next week."

'Limited impact'

So why didn't wheat fall further, ending down 1.7% at $6.62 ¾ a bushel in Chicago, but comfortably above day lows, and doing even better in Europe.

Paris wheat for March ended down just E1.00 a tonne, or 0.5%, having been down E4.00 a tonne at one point, while London wheat for May, in ending at £167.00 a tonne, recovered all but £0.10 of the £2.10 a tonne it lost earlier.

One reason was that some damage is estimated already to have been done, (although


crops have been of more concern).

Another is the uncertainty over Russia's failure to unveil further its thinking on export curbs, as had been expected, with an announcement now due on Friday, although some believe this will end up as underwhelming.

"With the Russians becoming less of a price driver in recent weeks the actual effect [a decision] will have on world markets outside of sentiment is fairly limited," UK grain traders at a major commodities house, with considerable Russian interests, said.

'Extremely cold'

There is also some dispute about whether temperatures will really ease as much next week as some believe. forecast that, while there may be a moderation in Europe's cold this weekend, overall "temperatures over the next seven days will be extremely cold.

"From the Pyrenees two north west Russia, temperatures will average 10 degrees Celsius or more below normal.

"Over the Balkans and southern Ukraine temperatures will average 6 degrees Celsius or more below normal."

Weather models show "that the deep trough in the jet stream covering all of central and eastern Europe, as well as the Ukraine and all of western Russian will make a another attempt to drive into western Europe and the UK in the six-to-10 day outlook", bringing cold weather with it, the weather service added.

'Rains are too late'

Bulls' nerves were also settled by US weekly export sales data of 519,000 tonnes, in line with forecasts, if not as strong as


, which beat estimates by hitting 912,000 tonnes.

Further good news on exports was provided by Japan, which bought 107,000 tonnes of US corn on top.

And Goldman Sachs did its bit by raising its forecasts for Chicago corn prices to $6.90 a bushel on the three-month and six-month horizons, from $6.30 a bushel previously.

Furthermore, while rain is returning to dry areas of Argentina, it may not offer much relief to crops.

"Current thinking is that the rains are too late prevent sharp yield losses," Rory Deverell at FCStone's European office said.

Corn for March edged up 0.2% at $6.43 a bushel.

'Could be devastating'

Goldman raised its forecast for


prices too, to $12.90 a bushel on three-month, six-month and 12-month horizons, from $12.15 a bushel, helping the oilseed end higher despite less favourable export sales.

'Soybean sales were dismal at 308,000 tonnes, at the low end of estimates," Darrell Holaday at Country Futures said, flagging also the weak trend so far this season.

"It is interesting to note that the current export sale pace is 443m bushels below a year ago. Of that total, China's purchases are down 217m bushels.

"This pace is a problem and could be devastating to this market eventually."

Also helping the March lot add 0.1% to $12.17 a bushel was a strong performance by the new crop November lot, up 0.5% to $12.23 ¾ a bushel, as it fights back in the battle against corn to win spring planting acres in the northern hemisphere.

Harvest delays?

Even these small gains were enough to outpace many soft commodities, again, with


ending lower despite increased concerns over the pace of the early Brazilian cane crush, with a weak pace, thanks to moisture, seen keeping the pressure on recovering world inventories.

"The general consensus seems to be the crop harvest will probably come on line later rather than earlier," Thomas Kujawa at Sucden Financial said.

That said, Czarnikow proposed that the shortage of credit created by tightened lending conditions could incentivise mills to do all they could to boost early season production and create cash.

Raw sugar for March closed down 0.5% at 23.48 cents a pound in New York.

Mixed export data


proved a better performer, adding 0.9% to 94.21 cents a pound in New York, for March delivery, amid talk of funds establishing positions in the market.

Weekly US export data was mixed. Sales themselves were dismal, with net cancellations of 164,000 running bales for 2011-12 crop, the weakest figure since September.However, exports themselves were large, at 366,000 running bales, the highest figure since March.


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