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Evening markets: yield fears support wheat. But sugar dips

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There appeared enough bad news around to put grain markets on the back foot on Monday.

Standard & Poor's curbed appetite for risk assets in general by warning that a debt rollover plan for Greece may put the country into selective default, and so was not quite the cure-all that it had looked.

Meanwhile, on farm commodity markets, India's farm secretary said the country was aiming for a record 245m tonnes in grain production.

And Russia exported a massive 1.1m tonnes of grain in one day on Friday, the first day the embargo on shipments following last year's drought was removed.

"This confirms that the demand is strong for Russian origin grain even if [cancelled] deliveries last year have made importers worry," Agritel, the Paris-based consultancy, said.

'Heat building'

However, risk markets continued to get some support from firm US manufacturing data on Friday, and China's apparent decision not to continue a round of raising interest rates every other month.

And, wheat prices were supported by talk that grain yields in the northern half of France, among Europe's most important producing regions, had got off to a poor start to harvest.

Furthermore, as David Sheppard at UK merchant Gleadell said, while last week's US data spoke of easier corn supplies, "it is also true to say that world corn stocks remain tight and that the world will again draw down on wheat stocks in 2011-12".

And in Russia, "where the drought and subsequent export ban started a year ago, heat is again building".

Price rises

Paris

wheat

- rather than opting for minimal movement in the absence of US markets, which were closed for the independence day holiday – added 2.8% to E193.00 a tonne for the best-traded November contract.

London wheat added 1.7% to £162.50 a tonne for November.

Paris

rapeseed

edged 0.3% higher to E432.75 a tonne for November, helped by the more supportive trend on oilseed markets since the US last week downgraded its domestic soybean sowings forecast.

In Winnipeg,

canola

for November added 0.3% to Can$554.30 a tonne, while

palm oil

for September closed up 0.5% at 3,050 ringgit a tonne in Kuala Lumpur.

Fund support

However, the positive mood did not stretch across all soft commodities.

Sure,

cocoa

ended higher adding 0.6% to £2,003 a tonne for September delivery, finishing over the £2,000 mark for the first time (for a nearest-but-one contract) since March.

Sentiment for the bean has been boosted by talk of a lower quality main crop in Ivory Cost, the top producer, than had been thought, with high cloud levels raising doubts about the mid crop, which starts being harvested in August.

Indeed, funds have been warming to cocoa – unlike other farm commodities, regulatory data published late on Friday, and covering US contracts, shows.

"Net fund length in [New York] cocoa posted the only increase over the week, of 4,500 lots to 14,400 lots, on the back of a combination of the establishment of fresh long positions, of 1,200 lots, and short-covering activity, of 3,300 lots," Sudakshina Unnikrishnan at Barclays Capital said.

(In Chicago corn, the net long position held by non-commercial traders, a category which includes speculators, plunged by 83,100 contracts to 321,400 contracts, "the steepest weekly decline in net fund length since end-June 2010".)

However, profit-taking dragged London white

sugar

for August down 0.6% to $765.00 a tonne from a four-month closing high.

By Agrimoney.com

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