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Morning markets: wheat extends gains, leading rise in ags

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Some things change. Monday (or rather, late Sunday) bought the extended opening times for Chicago crop futures, meaning investors can trade for all but three hours of the day.

Other things stay the same. Traders used the extra dealing times to mark wheat futures up even further, on continued concerns that hot and dry weather will cut hopes for crops in, chiefly, Russia, the US, but with some concerns in other areas, such as China, too.

Rain in Aus

In fact, fears around one major wheat producer, Australia, eased over the weekend, with rains reaching some eastern areas which have needed moisture for sowings, and more precipitation in the forecast.

"East coast grain growers will be buoyed by forecasts for beneficial rainfall later this week," Luke Mathews at Commonwealth Bank of Australia said.

"The heaviest rain is expected in central/north New South Wales and southern Queensland however most of the eastern grain belt is expecting some rainfall."

Furthermore, bears could also cling to improved hopes for Morocco's grains crops, thanks to late rains, meaning its imports will rise a little less far than had been expected, according to US Department of Agriculture staff.

The USDA's Rabat bureau cut by 700,000 tonnes to 4.9m tonnes its estimate for Morocco's 2012-13 wheat imports, albeit a figure still representing a record high.

'Significantly hotter and drier'

But it was advantage bulls again early on Monday, not least after German officials issued a reminder of damage from Europe's cold snap in February, forecasting a 9.5% slide to 2.87m hectares in the country's winter wheat harvested area.

Furthermore, official Ukrainian forecaster cut to at best 12m tonnes their forecast for the country's wheat harvest, from at best 14m tonnes.

the weather outlook in the US is deteriorating, ie showing more in the way of heat and less in the way of rain needed to finish wheat and help corn and soybean seedlings.

"It also should be noted that the new weather model data for June 2012 is significantly hotter and drier than what it was showing back the beginning of May and late April," weather service WxRisk.com said.

"Climate models are clearly looking hotter and drier than what the data was showing earlier in the month for much of the Plains and the Midwest."

'Remains a major concern'

As for the big question of Russia's grain harvest, from within the country itself, farm operator Black Earth Farming on Monday flagged the "lack of rain in the south remains a major concern" industry-wide.

"The early estimates of the total Russia grain harvest are in the range of 90m-95m tonnes, albeit with downside risks if the dry and hot weather in May persists."

And, as an extra booster for prices in Chicago, US regulatory data revealed that the hot weather had caught investors leaning the wrong way.

Speculators extended their net short position into Tuesday, by 3,870 contracts to a historically high 50,057 lots, meaning huge potential for short-covering to drive the market higher.

Eight-month high

Which is what wheat did as of 09:00 UK time, (03:00 Chicago time), soaring 2.2% to $7.10 ½ a bushel for July delivery in Chicago, and earlier hitting an eight-month high of $7.22 a bushel.

Kansas wheat was at $7.22 ¼ a bushel, up 2.5%, after touching $7.30 a bushel earlier.

And this was a help to

corn

too, which added 0.9% to $6.41 ¼ a bushel for July and, signally, 1.5% to $5.45 ¼ a bushel for the new crop December lot, as hot weather reminded that the USDA's estimate of a record US corn yield of 166 bushels an acre is not in the bag yet.

The regulatory data, from the Commodity Futures Trading Commission, also scope for speculators to add net length in corn too, with the net long at 82,667 contracts, among its lowest levels of the last two years.

'crush margins have turned negative'

Soybeans

rose too, up 0.8% to $14.16 ¾ a bushel for July and 1.3% to $13.04 ½ a bushel for the May contract, helped by not only the performance of its grain peers, but by values on the Dalian exchange in China, the top importer of the oilseed.

The Dalian's best-traded January 2013 contract rebounded 0.9% to 4,347 yuan a tonne, after six successive trading periods of decline, fostered by reports of Chinese releases from state inventories, and concerns over crushing profitability.

Benson Quinn Commodities clocked "talk that crush margins have turned negative" for Chinese processors.

Still, Chinese customs data showed imports still soaring as of last month, up 26% year on year at 4.88m tonnes.

Sugar sweetens

China's

sugar

imports were higher too, near-doubling to 311,000 tonnes, one feather in the sweetener's cap, besides reduced hopes for Brazil's harvest.

"Brazil's Centre South 2012-13 sugar cane harvest is struggling to expand this year after disappointing output in the 2011-12 season, which was caused by a mixture of bad weather and overdue replanting of ageing cane plants," Lynette Tan at Phillip Futures said.

While noting better ideas for Indian and Thai output, she also flagged the International Sugar Organization's estimate earlier in the month of a world surplus of 3m tonnes in 2012-13, half that of 2011-12.

Raw sugar for July added 0.5% to 20.57 cents a pound in New York.

Better macro picture

And a better picture in world markets played its part too in boosting agricultural commodities, with Asian

shares

making ground, by 0.3% in Tokyo, 0.2% in Shanghai and 0.9% in Seoul as some bargain hunters stepped in.

The safe haven of the

dollar

eased 0.2% in another sign of improved appetite for risk assets, and improving the competitiveness of dollar-denominated exports.

Indeed,

cotton

, of which the US is the top exporter, added 0.1% to 78.04 cents a pound.

By Agrimoney.com

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