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Morning markets: wheat futures rise above market malaise

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At least

wheat

knew which way it was heading.

Many risk assets, including many food commodities, struggled for direction on Wednesday, with the blame laid at the door of talks between French and German leaders, Nicolas Sarkozy and Angela Merkel, over eurozone stability not coming up with the goods.

The summit was deemed a "disappointment" by Westpac, who warned that the "eurozone remains in a dangerously half-baked condition".

In

share

markets, Tokyo stocks shed 0.6%, but South Korea's Kospi index added 0.7%.

'Thoughts of less acreage'

Oil

made some headway, standing up 0.5% to hold just above $87 a barrel.

But it was still slightly behind wheat, which set course for what would be a seventh successive day of gains in Chicago, continuing to feel a glow from Tuesday's US Department of Agriculture data which showed, for spring wheat alone, US farmers claiming insurance on some 2.6m lost acres.

(For

corn

, the figure was 2.9m acres, and for

soybeans

1.4m acres, although these represent lower percentages of total area.)

"The data is not complete, but thoughts of less acreage for wheat, soybeans, and corn have been widely thought," Mike Mawdsley at Market 1 said.

Factored in?

The question is how much has already been dialled in.

According to analysts at Benson Quinn Commodities, the data suggested "600,000-700,000 less wheat acres split evenly between winter and spring".

"Corn acreage could be down as much as 1.0m acres, along with soybeans down 500,000."

One private analyst was separately cutting acreage estimate for corn and soybeans anyway, by 400,000 acres apiece, citing flooded fields in the Missouri river valley in South Dakota, Nebraska and Iowa.

'Story not going away'

Whatever, it is wheat which has taken the greatest succour in the data, partly because speculators already have a short position in Chicago wheat, which they may be reluctant to extend.

And there are some concerns already growing about the health of the US spring crop, let alone the dryness in the South ahead of planting the winter crop.

"Dry conditions in the southern plains ahead of fall planting continue to be a story that is not going away," Dave Lehl at Benson Quinn said.

He added that "technically, the wheat charts are looking positive" too, with the Minneapolis September contract reaching back to $9 a bushel which, besides being psychologically important, marks the 100-day moving average.

Chicago and Kansas wheat have seen their "20-day averages cross over the 50-day average" in an upwards direction, a positive signal for chart followers.

Chicago's September contract added 0.6% to $7.29 a bushel as of 07:45 GMT (08:45 UK time), although its peers were slower. The Minneapolis September lot gained 0.3% to $8.99 a bushel, with Kansas wheat for September up 0.4% at $8.21 a bushel.

'Could be very emotional'

Part of the reason that corn and soybeans have taken a back seat to wheat in recent sessions (indeed, once again losing its premium to wheat, spot contract to spot contract), is the prospect next week of a much-watched crop tour, organised by Pro-Farmer.

Given the hot debate about crop yields, and especially whether the USDA was too optimistic or pessimistic in lowering its estimate for the US corn yield to 153.0 bushels per acre, the tour is likely to be particularly influential.

"The feed back could be very emotional," Mr Mawdsley said.

Luke Mathews at Commonwealth Bank of Australia also highlighted that "most forecasters suggest US weather will be favourable for crop development this week".

This duo, anyway, proved more in tune with the general market malaise. December corn dipped 0.1% to $7.26 ¾ a bushel, while November soybeans eased 0.25 cnts to $13.49 ¼ a bushel.

'Caution prevailing'

In Asia,

palm oil

did better, adding 0.4% to 3,015 ringgit a tonne in Kuala Lumpur for November delivery, helped by thoughts of a downturn in output from the big two producers, Indonesia and Malaysian, as workers take holiday for Ramadan, besides signs of growing Chinese imports.

But

rubber

dropped in Tokyo, shedding 0.3% to 326.60 yen a kilogramme for the benchmark January lot.

Ker Chung Yang at Phillip Futures in Singapore noted "caution prevailing in the market" amid all the macroeconomic fears, but said nonetheless there was "relatively high confidence in downstream rubber-industry demand".

By Agrimoney.com

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