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Morning markets: wheat starts strong, amid Ukraine doubts

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Agriculture commodities, eventually, decided to get out of bed on the front foot, helped by continuing hopes for a solution to the eurozone crisis, after the G20 added pressure for a solution.

There were reports too of moneybags China using some of its financial firepower to prop up the region, perhaps through buying infrastructure as well as government debt.

Shares had a risk-on feel, with Tokyo stocks adding 1.5% and Sydney shares 1.7%, helped by hopes of a solution to the eurozone crisis.

OK the

dollar

, investors' favourite safe haven, remained flat, signalling some reluctance by investors to embrace wholeheartedly more risk.

But commodities generally took a positive view, with Brent

crude

adding 0.4%.

Soybean correction?

OK, that did not spread to Chicago

soybeans

, which for delivery contract retreated 0.2% to $12.67 ½ a bushel as of 07:35 GMT (08:35 UK time).

The oilseed faced anyway a willingness to take profits following last week's rally, helped by a small US yield downgrade in the US Department of Agriculture's benchmark Wasde report.

"The technical structure of the soybean market remains supportive, but soybeans have reached levels that [make them vulnerable to] a correction," Brian Henry at Benson Quinn Commodities said.

"There is a possibility that the current price levels could trigger a correction of the recent move higher."

Dry weather

And there were some sparks for selling. Analysts at Informa Economics on Friday hiked their estimate for next year's US sowings by 1.2m acres to 77.0m acres.

Furthermore, weather was helpful too over the weekend, bringing dry weather to the US, the top soybean producer, to speed harvesting and South America too, where sowings are in progress.

Still, is there too much dryness, especially in Argentina?

"The forecast for Argentina and south eastern Brazil looks much drier for all this week than what the models showed last Friday," weather service WxRisk.com said.

Libyan cancellation?

Dry weather has looked a problem for Argentine wheat too, although the country's farm ministry late on Friday said that prospects were looking up in some areas due to recent rains.

"Plants have recovered their colour and have been lifted at an ideal time thanks to recent rains," the ministry said. It has estimated the crop at 11m-13m tonnes, below a USDA forecast of 13.5m tonnes.

Also a negative for prices are reported that Libya has cancelled a tender for 100m tonnes of wheat.

Ukraine doubts

However, on the bullish side were US regulatory data showing that speculators have a huge net short in Chicago wheat already – a positive, as it questions the appetite for further bets on price losses.

Furthermore, doubts are growing over Ukraine's ditching of grain export duties. While parliament voted 10 days ago to shelve the levies, President Viktor Yanukovych has yet to sign the decree to make it law, a delay which is beginning to cause some concern.

"In this context, most market operators are on the sidelines, slowing export pace," Agritel's Kiev office said.

"Only 400,000 tonnes of grains have been exported since the beginning of October, compared to 500,000 tonnes and 800,000 tonnes respectively on the same period of August and September," which were hardly bumper months.

Chicago wheat for December added 1.2% to $6.30 ½ a bushel.

Unusual premium

That helped

corn

too, for which supplies continue to look genuinely tight (as opposed to wheat's) but whose gains have been limited by some extent by the performance of its grain peer.

Wheat usually has the premium, and while corn has managed to turn the tables, the interchangeability of the grains for many purposes makes it difficult to take the reversal too far.

Furthermore, Friday produced upbeat export sales data for corn, and a downgrade by Informa to 2012 US sowings prospects of the crop.

Chicago's December lot added 0.8% to $6.45 ¼ a bushel.

'Range bound and directionless'

In New York,

cotton

eased 0.1% to 101.84 cents a pound for December.

"The market remains range bound and directionless," Luke Mathews at Commonwealth Bank of Australia said.

"The better than expected US retail sales result [on Friday] was supportive for cotton prices. However, last week's upward revision to world cotton stocks remains bearish."

Strong export data

However, in Kuala Lumpur,

palm oil

for January added 0.2% to 2,922 ringgit a tonne, continuing to distance itself from one-year lows set earlier in the month.

In Singapore, Ker Chung Yang at Phillip Futures noted "positive export outlook and expectations of Chinese soybean restocking", soybeans being the source of rival vegetable oil soyoil.

"Supporting prices has been strong export data, which came at a time of positive demand expectations ahead of re-stocking efforts in Pakistan and Indian buying ahead of Diwali at the end of the month," he added.Societe Generale de Surveillance

By Agrimoney.com

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