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Evening markets: wheat tumbles as weather turns for better

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Early resilience in farm commodity prices gave way to broad selling, as the double barrel of concerns over both US and European Union economies sank a number of markets.

Investors took a view that weather for some crops over the weekend was more helpful for farmers than had been thought, notably rain for dry grains in northern Europe.

"Some much-needed rain fell in Germany and France over the weekend," US Commodities said.

"The rain is a little late for the winter

wheat

, rapeseed, and barley but will aid the [later] crops like corn."

Darrel Holaday at Country Futures added: "The big weather news in wheat is the rain that fell across Europe and the forecast for the next two continues to offer good chances for rain."

'Selling developed'

Not that crop fears are over, with fears still extant for the former Soviet Union and North American spring wheat in particular.

Still, the prospect on Thursday of the US Department of Agriculture's latest much-watched Wasde report on world crop supply and demand instilled a more conservative feel into markets. As did a US briefing suggesting that Russia's stocks may be up to 6m tonnes higher than had been thought.

Wheat tumbled 3.6% to $7.46 a bushel for July in Chicago, with its Kansas peer losing 1.8% to $8.97 ¾ a bushel as of 17:40 GMT.

And as "more participants began looking at the models, selling developed and pushed the market lower", Mr Holaday added.

In Europe itself, Paris's best-traded November lot tumbled 2.8% to close at E229.50 a tonne, while its London peer fell 1.8% to £189.50 a tonne, and this despite a bit of help later on from a weakening euro/ strengthened dollar.

The

dollar

added 0.2% against a basket of currencies, putting dollar-denominated assets at a disadvantage in competitiveness terms.

'Offers limited'

The exception was Minneapolis spring wheat, which gained a further 0.5% to $10.66 ¼ a bushel for July, having touched $11.20 a bushel earlier, the first time a spot contract had topped $11 a bushel since July 2008.

"Offers in the market are few at this point," Benson Quinn Commodities said. At least, for delivery in that time frame.

The new crop September lot, relevant to the current sowings which US and Canadian farmers are having such trouble getting into the ground, fell 2.4% to $9.70 a bushel.

"One has to wonder who is going to be around to buy the market when it does find a decent offer," the Minneapolis-based broker added.

Sowing progress

Corn

shed 2.5% to $7.35 ½ a bushel for July, amid talk of rapid sowing progress last week even in Ohio, which has been very behind, but where growers are now estimated 85-90% sown, US Commodities said.

North Dakota, where wetness has also been a problem, "was slowed over the weekend by rain. However they are expected to be about 90% planted".

And remember that, given that rain and heat make grain, as the saying goes "the crop that has been planted is experiencing close to ideal growing conditions".

Weakness spread too into

soybeans

, which fell 2.0% to $13.86 ¼ a bushel for July delivery in Chicago, and July cotton, which tumbled 3.7% in New York to 155.63 cents.

December

cotton

did a little better, easing 1.0% to 137.34 cents a pound, with weather service noting that while next week America's "overall weather pattern looks pretty close to being seasonal for the middle of June", temperatures look set to stay "above normal" in "the drought ridden areas of Texas and Oklahoma".

Texas is the top cotton-growing state in the US, the world's biggest cotton exporter. Dry weather would at least be a help for the start of America's hard red winter wheat harvest.

Raw vs white

Among other soft commodities, the broader negative sentiment got the better of New York raw

sugar

too, which fell 1.4% to 23.62 cents a pound in late deals, for July delivery.

This despite continuing improvement in white sugar prices, which gained 0.4% to $696.20 cents a pound amid talk of some squeeze in supplies ahead of the Ramadan festival, which typically sparks a rise in demand.

"Thai whites are said to be trading at almost $60 a tonne over London August futures, reflecting a slow remelt and also problems at ports," Nick Penney at Sucden Financial said.

Supply of whites has also been boosted by knock-on effects from the temporary closure of Dubai's massive Al Khaleej refinery in April.

Coffee

tumbled 3.8% to 260.80 cents a pound, as investors continued to remove weather premium, following a no-show, so far, for frost in Brazil, and continued to adjust to resilient hopes for world production in 2011-12.

By Agrimoney.com

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