A positive start by grains and soybeans to 2013 proved fleeting – but coffee posted strong gains.

Many risk assets managed a strong start to the year, boosted by agreement among US lawmakers to a US budget, averting a dive over the so-called "fiscal cliff" and its automatic spending cuts and tax rises worth $600bn.

Shares gained 1.8% in New York, having closed up 2.2% in London, where the FTSE 100 index broken above 6,000 points for the first time in 17 months.

Commodities overall, as measured by the CRB index, added 0.9%, with Brent crude rising 1.1% to regain $112 a barrel.

'Ugly day'

However, corn, wheat and oilseeds missed out on the rally, and in some style.

"It has been one of the ugliest days we have seen recently in the grains," Darrell Holaday at Country Futures said.

"There was a big pool of selling waiting on the higher opening" which crops, briefly, enjoyed in Chicago.

The declines were blamed in part on a revival in the dollar which, having fallen in early deals, recovered to stand 0.2% higher, so making dollar-denominated assets, including many agricultural commodities, less appealing to buyers in other currencies.

That time of year

However, other forces were at work too, including, ironically, ideas that the settling of the US budget might increase American farmers' willingness to sell crops, now they know their tax position.

Richard Feltes, noting also the "flip in the calendar to a new tax year", said that the "resolution of the fiscal cliff, and a one-year Farm Bill extension, removes key uncertainties that have slowed farm selling in recent weeks".

He also flagged that "fund rebalancing will be a key feature of ag markets as traders gear up for 2013" - rebalancing being the process by which index funds rejig their portfolios to adjust weightings back to those specified by the index they follow.

That involves selling 2012's best performers, whose gains will see them represent an unduly large part of the portfolio, while buying laggards.

First shall be last

And certainly, there appeared some preparation going on for index fund sales, billed as starting on January 5.

Chicago wheat, for instance, a bullish star of 2012, during which it gained 19%, slumped 2.9% to $7.55 ¼ a bushel on Wednesday, for March delivery, a fresh six-month closing low for the contract.

Chicago soybeans, which added 18% last year, dropped 1.2% to $13.92 ¼ a bushel for the March lot.

Soymeal, which soared 36% in 2012, finished the session 3.3% lower at $405.70 a short ton for Chicago's best-traded March contract, its lowest finish for nigh on six months.

… and last shall be first

Meanwhile, some of last year's main losers made headway.

Soyoil, which dropped 6% in 2012, soared 2.7% on the day to 51.05 cents a pound for the March contract, following on from similar gains overnight in rival vegetable oil palm oil in Kuala Lumpur.

In New York, arabica coffee - one of the biggest losers last year, plunging 37% - rebounded 3.9% to 149.40 cents a pound for March delivery.

New York raw sugar, another dog of 2012, dropping 16%, closed the session 0.9% above where it started, at 19.69 cents a pound, earlier hitting a one-month high of 19.75 cents a pound.

The fund rebalancing theme wasn't perfect, with New York cocoa, which gained 6% last year, and so should be in for a little selling by index funds, adding 1% to $2,259 a tonne for March delivery.

'In jeopardy from drought'

Still, it helped explain the weakness in, for example, Chicago soybeans despite what might have been seen as price-positive news, in some doubts over South American weather.

Gail Martell at Martell Crop Projections noted that "Mato Grosso has experienced exceptionally dry conditions over the past two weeks, which is unusual in December, one of the wettest months of the summer season.

"In the key Centre West area, where soybeans are heavily cultivated, the December moisture deficit has increased to 100mm-150mm and 33-50% of normal."

"Perhaps 45% of Brazilian soybeans are in jeopardy from drought, all together, when other dry states in the tropics are considered."

Corn falls too

And influential crop scout Michael Cordonnier has flagged dry conditions in Brazil too, if in north central and north eastern regions, while keeping its forecast for the country's soybean crop unchanged at 80m tonnes, and corn harvest at 70m tonnes.

He also flagged the risk to corn in Argentina from delayed sowings, slowed by persistent rains.

Still, Chicago corn closed lower too, down 1.1% at $6.90 ¾ a bushel for March delivery, the contract's weakest close since early July.

Corn was a moderate gainer last year, closing 8% higher than it started the year.