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Morning markets: corn prices attempt to find the floor

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Just how much selling pressure went unspent in corn in the last session, when the grain closed down the exchange limit in Chicago?

Synthetic trading suggested the July contract would have lost about 5-7 cents a bushel, had it not hit the floor.

And that's where the lot settled down – if only after, in opening deals, falling by twice that much, to $6.65 ¼ a bushel, its weakest since mid-May.

Indeed, there were some signs of buying on weakness, after the carnage of the last session, which also saw wheat touch its lowest for nearly 11 months.

Buyers back?

Lynette Tan at Phillip Futures noted the prospect that "livestock feeders, ethanol producers and countries that are worried about short supplies in corn could step in to take advantage of tumbling prices in the next few days".

She added that "the correction in corn could be brief, as underpinning the corn market are bullish factors that signal tight supplies in the market", pointing to the firmer US ethanol production data out on Wednesday, and a forecast by the US Grains Council that China could import up to 5m tonnes of the grain this year.

(There is still, though, no confirmation of a Chinese purchase of US corn on the current break.)

And, after all, in wheat, Egypt stepped in after the close of the last session to unveil its second tender in 10 days. (Again, Russia need not apply, after blotting its copy book in Cairo by imposing an export ban last year.)

'Liquidation theme'

But will buyers face yet more selling pressure?

As Australia & New Zealand Bank said, "June has clearly been a month where fund liquidation has been the theme in across the grain markets with wheat losing almost 20% in the month to date".

There is plenty of talk of complete exits by some funds from agricultural commodity positions.

And, as Benson Quinn Commodities said, "funds may have more liquidation to do", especially "if additional points on the chart are taken out".

This month's slide has taken grains down through a series of technical points, itself a factor encouraging selling.

Russian danger?

And there is always the risk of further scares of bargain sales of Russian wheat, a factor which played a big part in the last session's debacle, after Black Sea grain heavily undercut European alternatives.

"Some trade houses were specifically targeting Russia as a source for lower milling as well as feed quality wheat, as [producers] could be looking to unload old crop inventories ahead of this year's harvest," Jon Michalscheck at Benson Quinn said.

"We would assume that if the Russian news in fact is true it could be an indication that they are feeling somewhat comfortable with their projected new-crop tonnage expectations."

That said, with lower quality, feed wheat seen as on offer from Russia, it may be corn that feels the pinch rather than the higher grade wheat which, given a disastrous spring sowing campaign in northern US and Canada, may be in short supply.

Cotton leads

And certainly, in early deals, it was wheat which fared the better, adding 0.6% to $6.41 ¾ a bushel in Chicago for July delivery as of 07:50 GMT (08:50 UK time).

Corn's selling wave from the last session continued to play out, taking the grain down 4.0 cents, or 0.6%, to $6.73 ½ a bushel.

Soybeans

, which with less speculative interest have proved less volatile, added 0.1% to $13.31 ½ a bushel for July.

Cotton

continued to be a far better bet, with the prospect of the expiry of New York's July contract encouraging further short covering by investors attempting to avoid being caught out, as with the expiry of May, and paying richly to close positions.

The July lot stood 2.2% higher at 164.70 cents a pound, although December cotton remained more tardy, up 0.05 cents at 121.50 cents a pound, especially with some rain falling in drought-hit Texas.

Data later

As for later, Thursday will bring US weekly export sales data, expected to see a figure for wheat in line with the previous figure of 455,500 tonnes.

Corn should match, or beat, the latest sales figure of 895,000 tonnes, and soybeans are forecast to double the 185,000 tonnes achieved last time.

Furthermore, Statistics Canada is to unveil updated acreage estimates, although given that they are seen based on survey data from last month, since when a lot of rain has fallen, traders are downgrading their importance.

And, back in the US, official data on the soybean crush are expected to usage of 127.5m bushels last month, in line with the April figure.

Furthermore, external markets will need watching, as the Greek sovereign debt crisis lurches through its latest dark episode, which provided a spur to the

dollar

, up 0.5% against a basket of currencies, and a potential headwind to prices of dollar-denominated assets.

By Agrimoney.com

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