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Morning markets:tour data protect wheat from market weakness

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One of the intriguing farm commodity landmarks passed in the last session occurred in



Chicago's December lot finished higher than the September contract. Which might not sound much, given that later contracts attracting a premium over nearer ones is the default state of affairs in farm commodities, to account for storage costs, risk, interest rates and the like.

However, in corn, the spread had been reversed for some time.

"September corn closed under December corn for the first time in almost a year," Mike Mawdsley at Market 1 said.

'Adequate stocks'

Very nearly a year indeed, with Benson Quinn Commodities tracing the inverse, which in April saw the September lot gain a 63.25-cent-a-bushel premium over December, back to the last week of last July.

Whatever, its reversal is not necessarily a bullish sign, especially for old crop contracts, with "some conversation amongst the trade see this as evidence of adequate stocks to carry end users to new crop".

And the September lot continued to mildly underperform the December lot, even if only by 0.5 cents, standing 1.5 cents lower at $6.80 ¾ a bushel as of 07:10 GMT (08:10 UK time). The December contract was 1.0 cents lower at $6.85 ¼ a bushel.

'More significant showers'

Indeed, both contracts continued to be damned by weather which continued to show reduced heat threat for major US growing regions.

"The jet stream will no longer stay north of the US-Canada border but is now forced to run west-to-east, south of the border," said.

This means that cold fronts will be allowed "fairly deep into portions of the central Plains and the Midwest in both the six-to-10 day and in the 11-to-15 day time frames".

"And more cold fronts coming further south usually implies more significant showers and thunderstorm chances and a less heat over the upper Plains and the Midwest."

Furthermore, there was Thursday's weak US export sales data to deal with, with prospects little-helped by a turn upward in the


after Moody's put Spain on review for a downgrade, showing the risk of contagion in the eurozone debt crisis remains alive.

'Substantial prevent plant'

But what is poor for corn has sometimes been good for


of late, with some talk of closing of "long corn, short wheat" spreads.

Furthermore, there were the results of the Wheat Quality Council tour of hard red spring wheat in North Dakota to factor in, with the crop pegged at a yield of 41.5 bushels per acre, beneath industry expectations, and 4.6 bushels per acre below last year's crop.

Still, more interesting for Jonathan Watters at Benson Quinn was "confirmation of substantial prevent plant in north western areas of the state", meaning that many farmers had opted to take insurance, rather than plant, in dismally wet sowing season.

And, with observations of scab and lodging (broken stalks), "continued wet weather over the next month would increase the possibility of a low quality crop".

Spring wheat itself traded 0.5% higher at $8.50 ¾ a bushel in Minneapolis for September, with Chicago (soft red winter) wheat, the speculator's choice, gaining 0.7% to $6.97 ¾ a bushel.

Stocks upgrade to come?


were caught in the middle, with the August lot adding 0.3% to $13.71 ¼ a bushel, helped by expectations that today, the opening day of the contract's expiry process, will see low deliveries of physical crop.

But the best-traded November contract did less well, slipping 0.1% to $13.70 a bushel, dented by Thursday's weak US export data, and a poor crush figure for June too.

The crush figure of 124.3m bushels was the "smallest for the month since 2004", besides being a little below trade expectations, farm economist Darrel Good, at the University of Illinois, said.

"The slower pace of crush in June along with a slower than expected pace of exports in recent weeks suggests that stocks could be larger than projected."

The oilseed's weakness helped depress

palm oil

too in Kuala Lumpur, where the benchmark October lot shed 0.3% to 3,107 ringgit a tonne.

Egypt - again

As for later on, besides the data on soybean deliveries, traders may also take an interest in the latest Egyptian wheat tender - the second this week - announced after the close of trade last night.

(Tenders from Russia, which has won the latest tenders, and Kazakhstan invited, but not Ukraine.)

It is intriguing that Egypt, the top wheat importer, should return to the table so quickly, after buying a relatively small amount, 120,000 tonnes, on Tuesday.

Not that Russia is widely expected to lose its newly-reacquired stranglehold.

"It is worthwhile noting that European Union wheat - at a hefty $35-40-a-tonne premium over Russian - does not look particularly cheap at the moment," UK grain merchant Gleadell said, adding that "current prices are still good levels for farmers".


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