Wheat had, early on, looked hot favourite to prove the worst performer on what looked like being a soft day for crops, it being month end – by lore, a time of fund sales of futures holdings – and with the dollarstrengthening too by 0.3% against a basket of currencies.
A firmer dollar makes exports denominated in it, such as crops, less affordable to buyers in other currencies.
Oil eased 0.2% a barrel, a light headwind for crops used in making biofuels.
‘Longs caught off guard’
And wheat had two extra obstacles, the first a notably bigger-than-expected delivery against Chicago’s September contract, as the lot begins its expiry process.
More than 1,500 contracts, equivalent to more than 7.7m bushels (210,000 tonnes), were delivered against the lot on its so-called first notice day.
"That is certainly not bullish," Darrell Holaday, at Country Futures, said, high deliveries in Chicago being seen as a sign that futures are high against cash prices.
"This caught some longs off guard and they are dumping their September positions."
Nearly 400 contracts were posted against the Minneapolis September spring wheat contract too, and 539 against the Kansas hard red winter wheat equivalent.
‘Sticking with bullish’
Wheat’s second hurdle was the forecast of rains in the southern Plains improving prospects for drought-pressed areas preparing to sow the 2012 hard red winter crop.
Still, not all were so convinced about how far the precipitation would go.
"If you think 0.10-0.75 inches in that region is enough then go ahead and change your bias to bearish. I’m sticking with bullish," Matthew Pierce at PitGuru said.
And, indeed, Kansas wheat added 0.4% for September to finish at $8.71 a bushel, while the December lot gained 0.3% to $8.95 a bushel.
Minneapolis wheat did even better, adding 2.8% to $9.67 a bushel for September and 1.4% to $9.46 ½ a bushel for December, spurred by talk of early frost about to hit the north of the US – even though such speculation was disputed.
"Early talk of frost… is over-hyped with temperatures expected to fall into the low 40s [degrees Fahrenheit], not 30s," Mr Pierce said.
Against this background, it was difficult for Chicago wheat to fall too far, which it didn’t for September delivery, closing down 0.7% at $7.45 ¼ a bushel.
The best-traded December contract added 0.1% to $7.91 ½ a bushel.
And that helped keep European wheat ahead too, adding 0.2% to E211.25 a tonne in Paris, for November delivery, and 0.4% to £174.75 a tonne in London.
A $22m Libyan order of 60,000 tonnes of French wheat, "using funds unfrozen in France earlier this month", has also helped sentiment, the UK grain arm of a major commodities house said.
Corn looked to have far less going against it, with no deliveries against Chicago’s expiring September contract, indicating that futures prices were not too high.
But then whispers of harvest results crept in, many of which were not that bad, (although all should be taken with caution, of course, given the potential of investors to talk up their own positions).
Sure, US Commodities noted that "the early yields in the Mississippi Delta and southern Midwest are poor, down 10-30 bushels per acre versus a year ago".
But Mr Holaday heard "bearish" reports from central Illinois that "some wet corn cut near Springfield is yielding more than anticipated, with some fields over 200 bushels per acre".
"Yields in southern Illinois have been disappointing, but still hearing yields of 140 bushels per acre. That is actually pretty good for that area, given the conditions they have seen this summer."
With end-of-month selling pressing, Chicago’s December lot closed down 1.0% at $7.67 ½ a bushel.
Soybeans even managed to avoid losses altogether, closing unchanged at $14.57 ½ a bushel for November, if below a three-year high for the contract of $14.65 a bushel reached earlier, helped by continued fears over a dearth of rains.
The September contract, while lesser traded, closed up 0.25 cents at $14.49 a bushel, after hitting $14.56 a bushel earlier – the best price for a spot contract for three years.
"Rains across Iowa, northern half of Illinois and Indiana yesterday and overnight were light," Benson Quinn Commodities said, also noting that the oilseed had "taken the leadership role of the grain complex over past several days on supply concerns".
The trouble is that, as Jerrod Kitt at Linn said, "August is when you make your soybean yield", and in many areas early forecasts of needed precipitation "just have not materialised".
In Europe, soybean strength helped oilseed peer rapeseed which, as the UK grain merchant above noted, is "currently lagging E90 per tonne" from its recent high, even as soybeans have revisited tops.
"With a clear link between soy and rape prices, a strong soy price will help support rape levels," the merchant added, as Paris rapeseed closed up 0.7% at E436.25 a tonne for November.
‘Stocks remain large’
Among soft commodities, cotton gained ground too, adding 0.4% to 105.81 cents a pound, boosted by the prospect of only poor rain in the US South, if kept in check by hopes for better crops abroad.
"China’s cotton stocks remain large, with commercial stocks up by 45% year on year, indicating sluggish demand from textile mills," Sudakshina Unnikrishnan at Barclays Capital noted, also highlighting reports that India’s crop could in 2011-12 set a record for a second successive year, this time of 35.5m bales.
And New York coffee gained, again, too, up 0.5% to a three-month high of 288.25 cents a pound for December delivery, and taking the contract’s gains in August to nearly 18%.
Jurgens Bauer at PitGuru, who has been awaiting a short-term coffee correction, said: "I must admit to second thoughts. But the market remains overbought.
"I think the situation is clouded by the approach of month-end."