Morning markets:wheat price revives, alongside weather fears

Wheat emerged fastest out of the blocks on Monday among farm commodities, boosted by revived concerns over winter crops in China and the US.

The general picture for riskier assets was firmer, with greater stability in Egypt since Hosni Mubarak's departure seen as beneficial for the global economic picture.

Asian stock markets gained ground. Tokyo's Nikkei index added 1.1%, Hong Kong's Hang Seng index gained 1.2% and Shanghai stocks jumped 2.5% to their highest of 2011.

The dollar, investors' favoured safe haven, eased a touch too, down 0.1% against a basket of currencies as of 08:30 GMT, making assets denominated in it, such as many farm commodities, more competitive.

'New overall weather pattern'

If that was a helpful background, wheat's value to investors was further enhanced by weather concerns which are only easing slowly for China's winter crop, and got a new jolt in the US from a change of weather.

"We have entered a new overall weather pattern across North America one which is dominated by a persistently strong La Nina," WxRisk.com said.

That means wetter and stormier conditions for the central Plains and Midwest but, crucially, worse prospects for moisture in hard red winter wheat regions desperately in need of rain as they approach emergence from winter dormancy.

"The implication is that the dry conditions over the lower Plains the Delta and the Deep South are likely to continue if not get worse over the next 60 days," the weather service added.

'Continue dry'

While some of China's critically dry winter wheat area did receive show and rain over the weekend, amounts were limited, equivalent to at best 0.5 inches in liquid terms, Meteorlogix said.

"Wheat areas of the North China Plain continue dry at this time," was the weather service's summary of the winter wheat situation, while adding that cooler temperatures over the next few days "should help ease stress to the dormant crop."

Luke Mathews at Commonwealth Bank of Australia said: "Much more precipitation is needed before the spring growing season."

China is the world's biggest wheat producer, with its winter crop accounting for the vast majority of its output. And on its Zhengzhou exchange, wheat for September, the best-traded lot, gained 2.4% to 3,081 yuan a tonne.

Chicago's March lot added 1.6% to $8.81 � a bushel.

Mexican frost

If that was one help to fellow grain corn, which is an alternative for wheat in uses such as feed, lingering concerns about a Mexican frost last week are another.

"The freeze has killed as much as 4.2m tonnes in Mexico, creating new worries" about a further call on US supplies from a major importer, Ker Chung Yang at Phillip Futures said.

US stocks are already expected to end 2010-11 at their tightest for at least 70 years, as a proportion of use.

"Mexico's crops damage could still be the theme lingering in the minds of traders," Mr Ker added, forecasting corn future will extend their rally today and indeed further ahead too.

"Given the fact that the corn supply has dipped to the tightest level since the Great Depression, we are optimistic and reiterate our call for Chicago corn to reach $8 a bushel in three months' time."

Chicago's March lot added 0.5% to $7.10 a bushel.

Supply competition

The broader strength in agricultural markets helped soybeans revive too, adding 0.6% to $14.24 a bushel for March delivery, despite the boost that the Brazilian harvest is giving to supplies.

"This means the world is producing more soybeans than it is using right now," US Commodities said.

Indeed, a cancelled Chinese order from the US last week is being taken as evidence that the world's top soybean importing country is shifting demand to South America.

Thai slowdown

Elsewhere, rubber set a new fresh in Tokyo, hitting 520 yen a kilogramme for the benchmark July contract, which closed at 518.70 yen a kilo, up 0.5% on the day.

The entry by Thailand, the world's biggest rubber producer, into a period of seasonal supply downtime has only heightened concerns of tightness stoked by surging demand for cars in China.

However, cotton took something of a breather in New York, standing 0.3% lower at 189.40 cents a pound in New York, following a 2.6% drop to 33,245 yuan a tonne in prices on China's Zhengzhou exchange.

China is the world's biggest cotton producer, consumer and importer, so its market signals are keenly watched elsewhere.

(Source: http://www.agrimoney.com/marketreport/morning-marketswheat-price-revives-alongside-weather-fears--964.html)

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