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US crop setbacks spark revival in soybean, cotton prices

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Soybean and cotton futures revived after official data showed that weather extremes had taken an unexpectedly large toll on US crops – although not large enough to support recoveries in grain prices.

Soybean futures for November added 0.7% to $10.17 ¼ a bushel in early deals in Chicago, while in New York, cotton futures for December added 0.6% to 68.72 cents a pound.

The gains followed US Department of Agriculture data overnight showing that the condition of US crops, beset by dryness in the western Midwest and excessive rains in the east, had deteriorated further last week than investors had expected.

"While trade has looked to the eastern half of the Corn Belt as being in fair to good condition with summer weather mostly favourable to date, the ratings say otherwise," said Benson Quinn Commodities.

'Yellowed and stunted'

Indeed, a 4-point drop to 57% in the proportion of the US soybean crop rated in "good" or "excellent" condition reflected largely deterioration in eastern growing states such as Illinois – where the reading tumbled by 8 points to 59% - and Kentucky, with a 7-point fall.

In Indiana, where the reading dropped 2 points to 47%, USDA scouts said that "though the beginning of the week was mostly dry and hot, rain storms moved across the state towards the end of the week, leading to localised flooding and very humid air.

'Late-planted soybeans appear yellowed and stunted in some areas.

"Farmers applied fungicide to corn fields, due to the increase in rust from the hot and humid weather," the scouts added.

The 57% soybean good or excellent rating, besides being 3 points below market expectations, was well below the average of 68% for the previous three years.

'Significant crop losses'

The US cotton crop was rated at 55% good or excellent – a figure in line with the three-year average, but down 5 points week on week.

That matched the fastest week-on-week pace of decline since 1999, when a 6-point drop was recorded in September, and reflected drops in states including top producer Texas where farmers' group Plains Cotton Growers earlier this month cautioned of crop damage.

"High winds carrying dirt and sand, along with multiple hail events have caused significant cotton crop losses in areas of the Southern High Plains and the Northern Low Plains," said USDA scouts in Texas, pegging the state's crop at 49% good or excellent, a 4-point fall week on week.

"Cotton fleahoppers were becoming a concern for some producers in the Northern Low Plains."

Grain prices ease

The USDA rated the corn crop at 62% good or excellent, down 2 points week on week, ahead of the 1-point drop investors had expected.

The three-year average reading for US corn condition is 74%.

However, Chicago corn futures, while posting gains in early trading, retreated to $3.87 ¼ a bushel, a 0.9% decline on the day.

Wheat futures eased too, by 0.7% to $4.85 ½ a bushel in Chicago for September delivery.

While the USDA data showed the domestic spring wheat deteriorating by 1 point to 33% rated good or excellent, that decline had been expected by investors.

"The prospect of cooler temperatures and some rainfall in the US – the world's leading grains exporter – is allaying fears of widespread drought and causing grains prices to fall," Commerzbank said.

By Mike Verdin

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