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Morning markets: euro life raft adds to crop price bouyancy

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The financial agenda turned back to Europe's debt debacle on Thursday, but this time in a more positive way.

One of the worries over the crisis has been how to keep the market onside, and buying government bonds at reasonable rates, in the face the regular downgrades of debt-laden countries such as Greece.

But Asian countries, and notably China, will buy a big thwack of the so-called bail-out bonds being auctioned off next month by the eurozone's E440bn rescue fund, according to the Financial Times.

(Remember, a eurozone collapse is hardly in China's interests, given that Europe is its top export market.)

Market impact

The news cheered a variety of markets. Tokyo shares closed up 1.5%, with Shanghai stocks adding 1.3%.

But, crucially for commodities, the news bolstered faith in the euro and sent the

dollar

sliding again, down 0.5% against a basket of currencies, so improving the affordability of dollar-denominated assets.

Copper

and

oil

edged higher, with New York crude cementing its position back above $101 a barrel.

And agricultural commodities had the extra impetus of the weather.

Crop stress?

Even the turn of Midwest conditions drier, helping farmers' planting prospects, was not greeted as a universally grower-friendly development.

Sure, "it is the first time this spring that some of those wet states have seen forecasts in the six-to-10 day outlook for above normal temperatures and below-normal precipitation", Mike Mawdsley at Market 1 said.

But Kim Rugel at Benson Quinn Commodities added: "The early arrival of the ridge and quick shift from cold and wet to hot and dry has many concerned that a change in pattern is afoot and crop stresses could ensue very quickly after the latent start to the season."

And conditions further north look like remaining wet, hampering spring

wheat

sowings, a factor which supported Minneapolis wheat in the last session and continued to this time.

The July contract stood 1.6% higher at $10.36 a bushel, within three cents of reaching the highest for a spot contract since summer 2008.

'Below and much below normal rainfall'

Meanwhile, prospects for rain in Europe, where dryness is the issue, remain concerning, with a front currently over the UK (and delivering a couple of spots of rain over the Agrimoney.com offices) not expected to bring "any sort of significant showers and thunderstorms", WxRisk.com said.

"In the six-to-10 day and 11-to-15 day forecasts, the [models] show below and much below normal rainfall for all of western and north eastern France, Germany, Poland, Austria, Belarus, the Ukraine and most of western Russia," the weather service added.

"Only over Spain and far southern France may see rainfall amounts above normal, and that occurs in the six-to-10 day."

From Paris, Agritel added, citing a forecast from Meteo France weather services: "In France, lack of rainfall impacts yield potential and the precipitation forecast for the coming days could end up being less abundant than expected."

Such forecasts provided an extra booster even for grain futures in the US, where Chicago wheat added 1.3% to $8.06 ¾ a bushel for July, while

corn

added 0.8% to $7.48 ¼ a bushel.

"What is going on in Europe is taking greater prominence on markets here," Market 1's Mike Mawdsley, based in the US state of Iowa, told Agrimoney.com.

Switch or claim?

Soybeans

remained the laggard, adding 0.5% to $13.84 ¼ a bushel for July delivery.

But then, the oilseed looks the least affected by the weather, being later sown, and may even pick up some acres if farmers unable to get their corn into the ground in time change crops.

"Most analysts anticipate producers will be switching some acres intended for corn to soybeans but crop insurance may have many acres going to 'prevented plant'," and making a claim on their policies, Mr Rugel said.

A Reuters poll on Thursday showed that analysts expect US corn sowings to come in at 90.3m acres, 2.1m acres more than last year but still, nearly 1.9m acres short of the US Department of Agriculture's current forecast.

Soybean seedings were pegged at 76.7m acres, down 600,000 acres from the USDA estimate.

Data later

Can grains hold on to their gains? Besides external factors, of course, and whether the dollar remains weak, Thursday brings weekly US export sales data, which are expected to be a little weaker this time, following the revival in prices.

Wheat sales are expected to come in between 400,000-700,000 tonnes, old and new crop combined, down from nigh on 800,000 tonnes last time.

For corn, the estimate is 500,000-900,000 tonnes, down from 1.15m tonnes, with only soybeans, whose shipment data has already looked poor enough, expected to hold on, at 150,000-325,000 tonnes, compared with 166,000 tonnes last time.

By Agrimoney.com

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