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PM markets: soybeans rally, cotton futures hit two-year high, 13.07.16

Soybean futures rallied as the long-term weather outlook in the US Midwest turned hotter and drier, while corn and wheat futures bounced back after the USDA forecast a tighter market.

In its monthly Wasde report, the USDA raised its forecast for this year's US soybean harvest by 80m bushels, to 3.88bn bushels, ahead of expectations.

But the results were seen as neutral, after export and domestic use were also upgraded.

World soybean ending stocks were in-line with expectations, at 67.1m tonnes, down about 5m tonnes year on year.

"The Wasde is still underestimating old and new crop US soy exports.

"Additionally,we are heading into a warmer/drier stretch as confirmed by drier tone in midday [weather] models," Mr Feltes added.

November soybean futures finished up 3.0%, at $10.87 a bushel.

Corn, wheat get a boost

Corn and wheat prices bounced, as the USDA's monthly Wasde report forecast tighter stocks than expected.

US corn stocks were forecast at 2.08bn bushels at the end of the 2016-17, compared with forecasts of 2.21bn bushel, thanks to an upgrade to export prospects.

True, 2016-17 stocks were seen some 3m tonnes higher than expected, at 208.4m tonnes.

And world wheat ending stocks were downgraded to 253.7m tonnes.

Although still a record level, this is some 5m tonnes less than expected, due to an upgrade in forecast feed usage.

US wheat ending stocks for 2016-17 were in line with expectations.

'Aggressive figures'

But Darrel Holaday, at Country Futures, pointed out that the ending stocks for corn and wheat were based on feed use projections that were "aggressive," with export figures also heavy.

"Rather than argue with the corn or wheat ending stocks number we will simply point out that prices are going to have to stay low to reach those export and feed use projection numbers.

"So that is not bullish," said Mr Holaday.

Still, December corn futures rallied on the report, finishing up 1.3% at $3.60 ј a bushel.

September Chicago wheat futures also bounced back in the wake of the Wasde, to finish the day up 1.3%, at $4.38 Ѕ a bushel.

Egypt makes first purchase of the year

Egypt, the world's top wheat importer, bought 180,000 tonnes of wheat in its first tender of the 2016-17 marketing year.

Gasc, the state grain buyer, purchased 120,000 tonnes of wheat from Russia, and 60,000 tonnes from Ukraine, at an average price of $173.03 a tonne cost and freight.

The tender came as the government finally decreed permissible levels of ergot up to 0.05%, in line with tender specifications, after months of uncertainty which saw Egypt pay over the odds for wheat last marketing year, due to seller fear of rejection.

Cheap Black Sea wheat

Gasc bought cargoes of Russian wheat from Louis Dreyfus and Aston at $164.24 a tonne, and $164.30 a tonne respectively, not including freight.

Gasc bought Ukrainian wheat from Louis Dreyfus $161.84 a tonne plus $10.35 a tonne freight.

Russian wheat prices are falling, thanks to pressure from a bigger than expected harvest, which is currently underway in country.

Black Sea prices for Russian wheat were down $7 week on week, to $165 a tonne, last Friday, Russian agricultural consultancy IKAR said on Monday, while SovEcon saw Black Sea Russian wheat at $170 per tonne, down $4.5, week on week.

French crop damage

But prospects for the rain-damaged French crop are looking less rosy.

The French Farm ministry saw the country's soft wheat crop at 36.95m tonnes, in its first forecast for 2016.

The ministry said that "excessive rain and lack of sunshine" would hurt the yields of winter crops.

The weather has "encouraged the proliferation of diseases and pests," and will also delay the harvest, the ministry said.

But the ministry figure was still considerably larger than an estimate out from ODA Groupe, which slashed its estimate for French soft wheat prospects by 3.0m tonnes, to just 32.0m tonnes, which would be a nine-year low, following a 1.5m cut in prospects last week.

Rival consultancy Strategie Grains last week pegged expectations for the soft wheat crop at 36.5m tonnes, while Agritel pegged it at 37.3m tonnes.

December Paris wheat futures rallied late in the session, to finish up 0.2%, at E164.75 a tonne.

Chinese stocks cut

The Wasde sent cotton futures soaring to a two-year high, as the USDA cut ideas of Chinese cotton stocks.

The USDA lowered its forecast for global stocks at the end of the 2016-17 crop year to 91.29m 480-pound bales, a five-year low.

The drop was driven by a 3.0m-bale trim to the 2016-17 Chinese ending stock demand.

December cotton futures finished up 4.4%, at 70.78 cents a pound, the highest level for the second-month contract since July 2014.

Sterling weighs on London markets

New York cocoa futures rose after stronger-than-expected European grind data.

European processing volumes rose 4.9% year on year in April-to-June period, a bigger increase than expected, as an apparent shortfall in West African grinding led Europeans to step into the gap.

New York September cocoa settled up 0.4%, at $3,114 per tonne.

But London markets fell back as the pound rallied, weighing on the sterling-denominated market.

London September cocoa futures settled down £29 , or 1.2%, at £2,468 per tonne.

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