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Morning markets: corn and wheat prices lifted by three Ds

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Grain returned refreshed from their US independence day break and recovered lost ground - helped by three Ds, demand, distrust and doubt.

The demand part was a lift in expectations for buying of grains following last month's heavy sell-off, which cost Chicago

wheat

, for instance, some 25%, on a spot contract basis, and

corn

more than 15%.

Indeed, South Korean feedmakers Nonghyup Feed and Major Feedmill Group revealed they were in the market for a total of 350,000 tonnes of corn, following China's (rumoured) purchases last week.

Lynette Tan at Phillip Futures flagged "corn purchases by China last week and expectations of more Asian buyers stepping in to take advantage of low prices".

"Feed millers in Japan, the world's biggest corn buyer, are also expected to lock in supplies, buying cargoes for August and September shipment after a slowdown in imports since the March earthquake."

'Particularly sceptical'

Mike Mawdsley at Market 1 said: "Looks like someone wants to buy more just in case government numbers are wrong."

Which brings us to the distrust element.

There is lingering disbelief of the US Department of Agriculture data showing that American farmers had sown far more corn than had been expected, and that stocks were richer than had been thought, estimates which ensured a dismal end to a poor June for grain futures.

"We remain particularly sceptical of the stocks report, which indicated the smallest implied March-to-May feed and residual demand in over 30 years," Morgan Stanley said.

Weather fears

As for doubt, concerns over weather are beginning to bubble up again, and pose the question of whether last month's liquidation deprived markets of too much weather premium.

Luke Mathews at Commonwealth Bank of Australia highlighted "concerns over dryness in France, south east Europe and [Russia's] Volga river basin", if noting improved weather in some other areas, such as Western Australia.

Further south in Russia, and in Ukraine, "persistent rains continue to degrade the quality" of grain crops, consultancy Agritel, which also has a Kiev operation, said.

And in the US, there are fears over a so-called "heat dome" which is currently worsening excessive dryness in the southern Plains and Delta, but could head wreak bigger damage if it heads north into the Corn Belt.

"All summer long, into September, forecasters are going to be watching this heat dome/ ridge and see where it goes. It will be a major issue," WxRisk.com said.

Currently, forecasts see the ridge heading up into the Midwest in the six-to-10 outlook and, after a temporary reprieve, in the 11-to-15 day timespan too.

French harvest

Add into this some "disappointing" yields from the French harvest so far, if "very good quality", according to Agritel, and the stage was set for a 2.3% rebound in Chicago wheat for July, taking it to $5.98 a bushel, as of 07:30 GMT (08:30 UK time).

The better-traded September contract added the same to $6.26 ½ a bushel.

Corn added 1.5% to $6.50 ½ a bushel for July, and 1.2% to $6.04 a bushel for the new crop December lot.

Soybeans

, which came off relatively well from the USDA data, added 0.6% to $13.30 ½ a bushel for July and 0.5% to $13.19 ½ a bushel for the new crop November lot.

'Overseas demand to slow'

The heat in the US South helped new crop December

cotton

keep its nose ahead by the slimmest of margins in New York, up 0.01 cents at 117.82 cents a pound.

The old-crop July lot fell 0.3% to 161.00 cents a pound amid continuing concerns over near-term demand for the fibre although, with expiry imminent, technical factors could well swamp any fundamental issues.

In Kuala Lumpur, the issue is whether there is sufficient demand to mop up extra

palm oil

production coming out of Indonesia and Malaysia following better weather.

"In the first half of this year, palm oil prices fell almost 20%, pressured by expectations for [Malaysian] stocks to soar above 2m tonnes at a time when output in South East Asia is growing, and overseas demand is likely to slow," Ker Chung Yang at Phillip Futures said.

And prices notched up fresh losses on Tuesday, recording a fresh eight-month low of 3,031 ringgit a tonne before recovering a little ground to stand at 3,033 ringgit a tonne, down 0.6% on the day.

It didn't help that the dog which didn't bark in the last session – the lack of a June interest rate rise in China – cocked an ear, with rumours now that China will raise borrowing costs this month.

By Agrimoney.com

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