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Morning markets:hopes for eurozone solution lift crop prices

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On Friday, a report from a major European commodities house noted this of the performance in grains, actually in particular

wheat

, during the retreat of so-called risk assets, which also include the likes of shares.

"It has been noticeable of late that wheat appears to be the most affected of the grains when the outside markets drag prices down but then benefits the least when the financial recover."

On Monday, that situation reversed itself. Angela Merkel, the German chancellor, and Nicolas Sarkozy, France's president, put the market on "risk on" footing by revealing their determination by the end of October to come up with measures to stabilise the eurozone.

Shares

gained, and the

dollar

, a favoured safe haven, fell, losing 0.6% against a basket of currencies as of 07:40 GMT (08:40 UK time).

Wheat rebounds

However, grains did particularly well, eclipsing the gains of 0.3-1% on major share markets.

Chicago wheat added 1.9% to $6.18 ¾ a bushel for December delivery.

Sure, there are reasons to be downbeat on the grain, including Ukraine's ditching on Friday of export taxes on wheat and

corn

, returning a keen price competitor to the market in earnest.

Furthermore, the southern Plains, which have long needed rains to speed autumn sowings, got a stack, although perhaps not quite as much as some of the more generous forecasts predicted.

Rain details

In the first half of the weekend, the likes of eastern Colorado, the Texas panhandle, south western Kansas and much of western and central Nebraska received some 0.25-1 inch of rain, according to WxRisk.com.

"Rainfall Saturday into Sunday was even more significant with the coverage increased and the rainfall amounts heavier," the weather service added.

"Much of south western and central Texas saw one-to-three inches of rain, with one-to-two inches of rain over southwest Oklahoma.

"Eastern Colorado, eastern Wyoming into western and central Kansas as well as all of Nebraska, all of South Dakota saw 0.25-to-1.5 inches with 70% coverage" and more precipitation was expected overnight.

'It rained cats and dogs'

It rained in the former Soviet Union too, which also needed precipitation, at least for autumn sowings.

"In Ukraine and central Russia, autumn is finally here," Agritel said.

"It rained cats and dogs yesterday. Some areas may have received more than 50mm of water."

For the bumper corn and sunflower crops, however, the rains meant that "harvests were therefore halted", and that drying capacity, or the lack of it, will rear its head as a factor for farmers dealing with large crop volumes.

Chicago vs Kansas

But the question was how much investors have already factored in in terms of easier fundamentals, with demand prospects now looking better – assuming the eurozone can get its act together.

Furthermore, there is the prospect of market-moving data ahead on Wednesday, when the US Department of Agriculture releases its latest monthly crop estimates, an event which often prompts a bit of caution.

And then there is the large short position investors hold in Chicago wheat, which regulatory data out late on Friday had indeed been being covered.

"The Commitments of Traders report as of October 4 including options, indicates that trend-following funds have been taking off short Chicago/long Kansas spreads," Brian Henry at Benson Quinn Commodities noted.

Kansas wheat duly rose less, by 1.1% to $6.92 a bushel for December.

China returns

For extra encouragement too, Chinese futures markets returned from a week-long holiday without too much of a bump.

Best-traded March wheat lost a relatively small 0.8% to 2,595 yuan a tonne on the Zhengzhou exchange, while on the Dalian, March corn lost all of 1 yuan to 2,256 yuan a tonne.

In Chicago corn added 1.4% to $6.52 ¾ a bushel.

And, staying in China, the country's crop bureau, the CNGOIC, forecast

soybean

imports by the top purchasing country reaching 4.3m tonnes this month, 5.2m tonnes in November and 4.7m tonnes in December, plus 4.6m tonnes in January.

That represents a pick-up from the average pace in the first eight months of 2011, of 4.2m tonnes per month.

Chicago soybeans gained 2.3% to $11.85 a bushel.

Cotton higher

Cotton

actually rose on the Zhangzhou, adding 0.5% to 20,220 yuan a tonne, a positive influence for international prices, given that China is the top consumer and importer of the fibre, besides the biggest producer.

New York cotton for December gained 0.4% to 102.43 cents a pound.

By Agrimoney.com

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