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Morning markets: weather upsets keep crops reasonably firm

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Agricultural commodities struggled, with some success, to regain their knack for winning starts to the week, as Greece's debt problems returned to the top of the macroeconomic agenda.

Greece's coalition politicians must by noon tell the European Union whether they will agree to a new E130bn bailout, and the painful smallprint, or risk a disorderly default on its debt.

A somewhat wavering attitude in Athens weakened the euro and sent the

dollar

up 0.4% against a basket of currencies as of 08:50 GMT. A stronger dollar makes dollar-denominated assets, such as many commodities, less appealing to buyers in other currencies.

And, indeed, many raw materials struggled, with Brent

crude

easing 0.1% and London

copper

lower too.

'Extensive damage'

But the impact was at least muted by the time it reached agricultural commodity markets, in part thanks to weather setbacks. Farm commodity markets had opened higher in eight successive weeks before last week.

Australian

cotton

and

sugar

cane growers continue to battle with floods which, for a second year, have inundated some eastern areas.

Queensland issued fresh alerts over the weekend, while farm officials in New South Wales on Monday restated that "the widespread flooding has caused extensive damage to agriculture industries, including sugar cane and soybean crops" on its north eastern coastal area.

Inland, "heavy rain and flooding is affected a large area of the central north and north west of the state", leaving more than 570,000 hectares "inundated".

Pakistan clears exports

Indeed, this was some help to New York prices of the soft commodities, as was a firm performance by futures on China's Zhengzhou exchange.

There, September sugar added 0.7% to 6,567 yuan a tonne, while September cotton closed up 1.9% at 22,545 yuan a tonne.

And, as for Pakistan's announcement of 100,000 tonnes of white sugar exports, thanks to a production surplus viewed as holding potential for more shipments, this had been long expected, and factored into prices.

New York raw sugar added 0.5% to 24.05 cents a pound for March delivery, while March cotton gained 0.7% to 96.99 cents a pound.

'Remarkable cold'

And there was enough cold in the European Union and former Soviet Union over the weekend to keep

wheat

futures from significant falls.

The consensus appears to be that Russia's crops, which were in generally good condition before the cold snap and had better snow cover, have escaped serious damage so far.

But for much of Ukraine, where winter grains were in poor health, snow cover is not so widespread either, although some western areas received up to 1 foot of snow over the weekend.

"The minimum temperatures on Sunday morning across Europe and the Ukraine into western Russia again featured remarkable, if not record setting, cold," WxRisk.com said.

Yet "much of southern Ukraine has snowfall on the ground under four inches, which is really not a lot".

'-20 degrees in France'

Most of the European Union saw a cold weekend too, with maximum temperatures on Sunday "again very cold across all of Europe except for south of the Pyrenees, southern Italy and Greece, and the UK", WxRisk.com said.

As for minimum temperatures, "much of France was well below freezing with some locations in the Rhone valley dropping to -20 degrees Celsius, or -3 degrees Fahrenheit.

"Temperatures over the Benelux countries and most of Germany were either near -18 degrees Celsius or -22 degrees Celsius, and this sort of a temperature covered much of Poland as well as Hungary and Austria and north eastern Italy."

Chicago wheat for March dipped in an out of positive territory, before standing at 0.8:50 GMT down 0.2% at $6.59 ½ a bushel.

Report ahead

C

orn

followed, down 0.2% at $6.43 ¼ a bushel, failing to get weather help now drought-struck areas of Argentina have turned damp, and with some concerns over a big ag event this week – the US Department of Agriculture's latest monthly Wasde crop supply and demand report.

"Watch where we are trading going into the crop report Thursday," Mike Mawdsley at Market 1 said.

"Lately the market has struggled after the reports have been released."

Much attention this time will be on the degree to which the USDA downgrades estimates for South American corn and

soybean

crops, because of poor weather.

'Caught trade off-guard'

But, currently, it appears soybeans over which investors are rebalancing further harvest ideas, after Informa Economics on Friday slashed by 4.5m tonnes to 46.5m tonnes its estimate for the crop, part of a 7.6m tonnes-downgrade for South America as a whole.

"Informa's South American soybean production estimates caught trade off-guard," Kim Rugel at Benson Quinn Commodities said.

Soybeans for March were 0.3% higher at $12.36 ½ a bushel.

By Agrimoney.com

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