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Morning markets: wheat defies threat of pre-holiday selling

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It was a fair bet that agricultural commodity prices might struggle on Friday, there being a US holiday ahead, on Monday, a prospect that often encourages a spot of position closing.

Such a trading pattern, given the rises of the last couple of days, would imply negative pressure on prices.

"With a long weekend in both the UK and the US this weekend the market could see a level of profit-taking," a major European commodities house said in a report.

Besides, Russia "is expected to make an announcement on the likelihood of exports of

wheat

in the next few days, with many buyers pinning there hopes on this putting some form of a brake on rampaging prices".

The prospect of the return to shipments of a competitively priced wheat exporter, following a ban imposed following its drought last year, has been a topic of some concern for grain markets, with the next question being what Russia's available supplies will be.

Lost acres

But the selling had not kicked as of 06:30 GMT (07:30 UK time), with weather concerns continuing to keep prices on the up, notably again for hard red spring wheat, as traded in Minneapolis, which US and Canadian farmers are having difficulty getting into the ground because of wet.

"An already-slow planting pace in the northern plains and Manitoba is expected to be interrupted by rains over the weekend," Brian Henry at Benson Quinn Commodities said.

"Regardless of how late the planting can continue, many of these areas will not be able to deal with another round of excessive moisture."

Estimates currently put the loss of spring wheat area at 800,000-1m acres, a figure which "should increase" if imminent rains strike as forecast.

'40% of the province's wheat lost'

But, of course, it is not only in North America that weather is an issue with, as Mike Mawdsley at Market 1 noted, "dryness in China being discussed again".

Barclays Capital said that Shandong, China's second-ranked wheat-producing province, "has received just 12mm of rain since September 2010, with some reports indicating that around 40% of the province's wheat crop has been lost".

"Drought-like conditions in the Yangtze River basin and eastern Shandong are likely to weigh on Chinese food production and increase import demand."

And it is not obvious that rain relief is on its way.

"Weather models are not favouring the North China Plain over the next two weeks and this should lead to developing dry spots that could hamper early corn and soybean growth in an area that encompasses about a third of the crops," Australia & New Zealand Bank said

Dollar help

Add to this a weaker

dollar

, down 0.6% against a basket of currencies following the disappointing US economic growth data released on Thursday, and the stage was set for further rises, early on at least, led again by Minneapolis.

A weaker greenback helps prices of dollar-denominated assets by making them more competitive to buyers in other currencies.

The Minneapolis July contract gained 1.1% to $10.57 a bushel, helping its peer on Kansas, which trades hard red winter wheat, gain ground too, up 0.6% at $9.48 ½ a bushel.

Kansas prices are also being supported by strong cash market prices which are, unusually, firmly above levels for futures.

Chicago wheat gained 0.6% to $8.19 a bushel for July.

Rapeseed's run

And this helped fellow grain corn higher too, despite the prospect of drier weather for US areas which have been struggling against damp to get crop into the ground.

Corn

for July added 0.4% to $7.48 ¾ a bushel.

Soybeans

added 0.5% to $13.91 a bushel, helped also by the wet Canadian and dry European weather, a potential setback for production of

rapeseed

, the rival oilseed.

"Drought-like conditions continue to engulf French and German rapeseed production regions," Luke Mathews at Commonwealth Bank of Australia said.

Paris rapeseed, it should be noted, has risen for the last 10 sessions in a row, closing on Thursday at E490.50 a tonne for August delivery, and gaining more than 10% during the run.

By Agrimoney.com

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