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Morning markets: weather and dollar limit wheat price losses

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The last trading day of the month is often a weak one by reputation, being seen as a time when funds sell down positions, potentially ahead of fresh investment at the start of the next month.

But this time, Chicago investors had an extra reason to sell, what with Russia lifting its grain export ban (as of July 1) on Saturday (US markets were closed on Monday), and weather turning more favourable for some countries too.

Western Australia, for instance, Australia's top grain-producing state, had rain although there was some dispute over its significance.

Luke Mathews at Commonwealth Bank of Australia termed it "extremely beneficial", and as something which has "sharply improved grain production prospects following extremely dry conditions throughout most of autumn"

However, Australia & New Zealand Bank said that "falls were disappointing" in southern and eastern agricultural areas, which have indeed received only "patchy" precipitation this month, of some 40-80% of normal levels.

'Frost damage'

Parts of Europe, where dryness has also been an issue, have received some rains too, while in Canada, where cool and wet conditions are the problem, farmers have managed seeding progress despite more of the same weather, getting 73% of the spring crops in the ground, if still behind an average of 87% by now the Canadian Wheat Board said.

Still, even here "some frost damage to early-seeded grain was reported during the week, with producers waiting to assess whether reseeding is necessary", the board said.

And forecasts aren't that encouraging, with rain due imminently for parts of Manitoba and Saskatchewan, and again later in the week, WxRisk.com said, adding that in North Dakota, a big US spring wheat area also struggling with wet, further "significant rain" is due.

The weather service foresees a return to drier conditions for Europe too, as well as limited rainfall prospects for Ukraine and Russia, where some forecasters are getting excited about the lack of precipitation (again) even if farmers seem to be enjoying being able to get crop in the soil without interruption.

Back to 1983?

In China, too, the North China Plain and Yangtze river valley "will stay dry for next seven days", after a dry weekend, furthering dryness concerns in that department.

And even a drier spell for Corn Belt areas, where dryness is welcome, is not being greeted with universal enthusiasm.

"Farmers in the saturated areas say they need a week just to dry out," Mike Mawdsley at Market 1 said.

At Benson Quinn Commodities, Kim Rugel said: "Trade is nervous we could be in for a repeat of 1983, when Mother Nature shut off the spigot in late June after a wet spring delayed planting."

Minneapolis retains some spring

So while investors did remove some premium from grain prices, falls were limited as of 07:30 GMT, with a weaker dollar, down 0.4% against a basket of currencies, also slowing that selling urge a bit.

A softer

dollar

- which fell as the euro appreciated on hopes for a solution to Greece's sovereign debt problem - enhances the price competitiveness of dollar-denominated assets.

Chicago

wheat

, which tumbled more than 4% in early deals, in line with falls in Paris on Monday, recovered half its losses to stand at $8.03 a bushel for July delivery.

Minneapolis spring wheat was even more resilient, on those Canadian and northern US sowing concerns, shedding 1.5% to $10.40 a bushel for July but dipping a more modest 0.9% to $10.10 a bushel for the new crop September contract.

Soybeans lead

Chicago

corn

fell 0.4% to $7.55 ½ a bushel for July and by 1.0% to $6.77 ½ a bushel for the new crop December lot.

Soybeans

, indeed, were the most resilient of the Chicago majors, adding 0.3% to $13.84 ½ a bushel for July delivery, and 0.2% to $13.71 a bushel for the new crop November contract.

But then good news for corn sowings means US farmers are less likely to switch to soybeans, which are later planted, and conditions have hardly been ideal for crops of rival oilseed rapeseed in Canada and Europe.

Cotton revives

Still,

cotton

was the top performing crop in early deals, adding 2.8% to 157.01 cents a pound for July delivery. The new crop December contract added 2.1% to 132.25 cents a pound.

The market, volatile anyway for most of the last year on the back of thin inventories, has been especially difficult to fathom of late, even for industry veterans.

Whatever, the contracts will have been encouraged by a rise of 2.7% to 26,225 yuan a tonne for cotton (for September) on the Zhengzhou exchange in China, the top importer, producer and consumer of the fibre.

And, staying in Asia, Kuala Lumpur

palm oil

added 0.3% to 3,418 ringgit a tonne for August delivery, underpinned by data from cargo surveyors showing a rise in palm exports from Malaysia, the second-ranked shipper and producer.

Societe Generale de Surveillance pegged the rise at 2.5%, with Intertek Testing Services putting it at 8%.

By Agrimoney.com

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