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Morning markets: wheat rally stalls ahead of Russia meeting

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It could be a big day for

wheat

, bringing, according to Russian deputy prime minister Viktor Zubkov, the Russian government meeting which will give more clarity on any plans for grain export curbs.

And wheat futures suffered a little stage fright ahead of the session, weakening from four-month highs in Chicago, if only by a modest 0.2% to $6.72 ¾ a bushel as of 08:45 GMT.

There are still other reasons for concern, after all, even if Russia waives a 23m-25m-tonne trigger point for export curbs, a level which, thanks to a strong pace of shipments, looks set to be met well before the end of 2011-12.

The cold snap hitting the former Soviet Union and Europe is one, which, having been blamed for some 90 deaths, is now threatening gas supplies from Russia's Gazprom to Europe.

Winterkill, or not?

MDA Earthsat has already estimated that up to 15% of Russian winter wheat and 20% of winter

barley

could be harmed by the cold snap, although many observers have warned against ideas of excessive harm.

Consultancy Agritel said: "The European part of Russia is currently under a 35cm snow cover. Thus even with -27 degrees Celsius temperatures, frost damage should remain limited."

That said, "in some places around Rostov and Krasnodar, in the south western part of Russia, there is less snow and temperatures fell to -12 degrees Celsius".

The bigger worry is in Ukraine, whose winter grains crop entered the cold weather in poor health, and where "seven regions in the southern part of the country haven't enough snow to protect crops from the current cold wave.

"These regions represent almost half of fall seeded area in Ukraine."

'Not without their worries'

And concerns are rising for

rapeseed

, more vulnerable to the cold, too, at a time when the European Union is already struggling for supplies of its default oilseed, used largely in making biodiesel.

Successive seasons of poor weather which have cost Germany its top rank among EU rapeseed producers, and disappointing crops in Ukraine, a major source of imports too, have squeezed crushers' margins, as highlighted by Archer Daniels Midland earlier in the week.

"Rapeseed futures are not without their worries as severe cold threatens another season of yield losses due to winterkill," broker FCStone's European office reported.

"Most of north and east Europe are getting very cold weather and not all areas have adequate snow cover."

'Reluctant sellers'

Back in Chicago, with wheat, the market leader of late faltering, other crops struggled too, although

corn

received some support from farmers' unwillingness to let go of supplies, which has held cash prices high.

"Strong prices for corn futures are not loosening the tight grip farmers have on their stored supplies, as they remain reluctant sellers of inventories," Lynette Tan at Phillip Futures said.

"Farmers believe the big break in price since August has left corn undervalued. Many of the corn producers have sufficient cash from lucrative sales last fall so there is generally no urgent need for cash flow at this point."

Corn for March stood unchanged at $6.42 a bushel.

Technical battleground

Soybeans

fell too, by 1.5 cents to $12.13 ¾ a bushel for March, as rain in South America raised growers' hopes that crops would not fulfil their worse expectations, even if downgrades keep coming through.

Late on Wednesday, consultancy Abiove cut by 2.7m tonnes to 71.9m tonnes its estimate of the Brazilian soybean crop.

The drop left soybeans at a crucial chart point, standing just above their 100-day moving average, a fall below which would be seen as a negative technical indicator.

Corn and wheat have slightly bigger cushions above their 100-day lines.

Data later

Besides any Russia decision, key for prices later on will be weekly US export sales data, expected to see orders for the main crops fall just below last week's firm levels.

For wheat, sales of 400,000-600,000 tonnes are forecast, down from 619,000 tonnes last time, with soybean orders seen easing from 592,000 tonnes to 350,000-550,000 tonnes.

Corn sales are pegged at 700,000-950,000 tonnes, below the 1.0m tonnes the previous week.

Softs harden

As for soft commodities, they reversed a little of their recent disadvantage against grains, making better use of a

dollar

weakened by waning fears for world economic growth.

The dollar eased 0.1% against a basket of currencies, making dollar-denominated assets including many farm commodities that much more competitive.

A brighter economic outlook is particularly helpful for

cotton

which, as a non-food farm commodity, is more reliant for demand on consumer sentiment. New York's March contract added 0.4% to 93.74 cents a pound.

New York raw

sugar

added 0.3% to 23.67 cents a pound, helped by small gains overnight on China;s Zhengzhou exchange.

By Agrimoney.com

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