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Morning markets: wheat sidesteps drops in corn

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Corn continued its retreat on Friday, amid growing scepticism of a freeze which would damage US yields, while wheat looked for a stronger finish to the week.

The risk of a frost next week, which according to commodities analysts Hightower could cut up to 400m bushels from the US corn crop, appeared to be diminishing, latest weather forecasts showed.

"Many of the weather sites are taking the frost threat out for next week," Tim Hannagan, at Hightower, said.

That encouraged the exit from corn, which stood 2 cents lower at $3.27 a bushel for Chicago's December contract, 6% below its highs of Tuesday, when a freeze appeared a stronger possibility.

Changing forecasts

Nonetheless, near-term corn remains 10% above last week's 2009 lows, suggesting that traders are keeping some risk premium.

Mr Hannagan said: "On Tuesday, the weather gurus suggested 90% of the grain belt could get hit by frost. Wednesday it was cut to 40%. By Saturday, it could be taken out of the forecast completely and put back in by Sunday."

The latest Meteorlogix forecast for main US growing regions sees "temperatures near to above normal during this period turning cooler across the west Monday and Tuesday".

Bean supplies

Soybeans remained relatively calm, standing 2 cents lower at $9.51 a bushel for November delivery.

The crop is being supported by the thought that, even if US yields appear exceptional, the world will have limited supplies until South American harvests early next year.

Wheat was the pick of the bunch, up 2.75 cents at $4.64 ½ a bushel for December delivery, as reasonably bullish data from Informa Economics fed their way through.

Brazil wheat checks

The analysis group on Thursday cut its estimate of this year's US crop, albeit by a modest 15m bushels, while forecasting a drop of 1.30m acres in winter wheat plantings for the 2010 harvest.

However, the data was overshadowed then by falling corn and news that Brazil is to test US wheat for vomitoxin, a fungal residue which does what is says on the tin when ingested.

Traces of the protein have been found in early-harvested soft red winter wheat in the US, traders said.

Brazil, while a big producer of corn and soybeans, is a relatively small grower of wheat, and is expected to import as much as it reaps in 2009-10, about 5.5m tonnes.

Holiday ahead

In Kuala Lumpur, palm oil managed a better start, with the benchmark December contract rising 22 ringgit t0 2,204 ringgit a tonne in morning trade.

The improvement was credited largely to investors closing short positions ahead of a long weekend to celebrate the Muslim festival of Eid al-Fitr.

The Bursa Malaysia Derivative Exchange will be closed on September 21 and 22 for the festival.


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