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Evening markets: ag futures close mixed as fund buying wanes

Are agricultural commodities losing some of their appeal to the funds which have been piling money into the sector?

Certainly, some appeared to think it was time to take profits, with bulls' darling of late, arabica coffee, rediscovering reverse gear and closing down 1.8% at 169.45 cents a pound for May delivery.

That still leaves it up 33% for February so far, underpinned by concerns of large crop losses to drought in Brazil, the top arabica grower and exporter.

And, indeed, the extent of the rally has raised eyebrows among some commentators.

'Funds have a tight grip'

Raw sugar, of which Brazil is also the top producer and exporter, lost some of its fizz too, falling 0.8% to 16.33 cents a pound for March delivery.

A weaker real, whose decline lowers the value in dollar terms of commodities in which Brazil is a major force, hardly helped.

And in Chicago, wheat, which has also enjoyed a February, found retreated too.

"Funds still have a tight grip on the commodity sector," Darrell Holaday at Country Futures said.

"They started the week in that mode and it has generally not changed, but the momentum has waned somewhat."

'May be pricing itself out'

For wheat, there is some concern after all that higher prices may be deterring buyers, with latest US export data soft.

"US hard wheat may be pricing itself out of the world export market," CHS Hedging said.

Benson Quinn Commodities said that "global wheat demand, which isn't great, has viable alternatives to buying US soft wheat.

"Hard wheat business has typically been routine business."

More on US exports will be known on Friday, when the US Department of Agriculture releases weekly export sales data, expected at 400,000-700,000 tonnes for the grain.

'No notable winterkill'

Meanwhile, snow cover looks like growing in many winter wheat areas ahead of a fresh bout of cold temperatures expected next week.

Snow cover should begin to rebuild across northern Kansas and Nebraska again today and late weekend," said weather service MDA.

Although cold temperatures in the Plains and the Midwest next week "will increase ice again on rivers, no notable winterkill is currently expected on wheat".

Wheat for March closed down 0.6% at $6.16 a bushel in Chicago, where the May lot ended unchanged at $6.13 a bushel.

'Should scare short traders'

Fellow grain corn did better, gaining 0.5% to $4.55 a bushel for March delivery, the highest close for a spot contract in five months, lifted in part by fresh unrest in Ukraine, news that CHS Hedging warned "should scare short traders in corn".

"With the unrest in the Ukraine, the US could see increased demand for corn in the export markets," the broker said, noting that "although domestic premiums have a weaker tone, export basis levels are firm".

Furthermore, the dryness in South America is continuing to blip on the radar, as a danger to sowings of the follow-on safrinha crop perhaps more than over main crop prospects.

"Dry conditions in portions of South America have raised concern about the potential of the safrinha corn crop in Brazil," Benson Quinn Commodities said.

Sowings data

And corn got an extra boost from the USDA's first formal forecasts for US sowing this year, which came in at 92.0m acres, down 3.4m acres year on year, and 1.5m acres below the outline figure pencilled in in last month's Baseline report.

There was some dispute over the data.

"At first glance, it appears the USDA is light on total acreage," Benson Quinn Commodities said

US Commodities said that the USDA did not increase acres for crops overall "to account for the 1.7m acres that came out of [conservation programmes] last fall, or the prevent plant acres of 8.1m acres from last year.

"The debate remains."

'Not a positive sign'

Still, it all helped corn get over some weekly ethanol data which some saw as negative.

The report showed a rise of 141,000 barrels in inventories, to 17.2m barrels, last week on an increase of 1,000 barrels a day in production, to 903,000 barrels a day, in production.

The briefing "was not friendly for ethanol values", said Country Futures' Mr Holaday, and indeed the biofuel fell 1.5% to $2.07 a gallon in Chicago, for March delivery.

A rise in ethanol inventories to the highest level of 2014 had "occurred at the same time that ethanol production was basically unchanged with a week ago.

"This is not a positive sign for ethanol demand."

China silence

For soybeans, the USDA estimate for US sowings was deemed supportive too, in coming in at 79.5m acres, up 3m acres year on year, but below market expectations.

This when demand for old crop US soybeans is not seeing the reversals that many investors had expected, given the ramp up in South American harvests.

"Traders are waiting for some soybean cancellations or switching by China to South America. There have been no confirmations at this time," US Commodities said - at least, no cancellations revealed since last week.

More may be known tomorrow, when the USDA is expected to reveal weekly export sales of 150,000-500,000 tonnes, old crop and new crop combined.

'Started deteriorating'

Furthermore, there are the lingering concerns that South American crops may fall short of, lofty, expectations.

"Soybeans in southern Brazil started deteriorating in the past three to four weeks due to dryness - February is the main pod-filling month for the crop," US Commodities said.

And in Argentina, the farm ministry cut by 500,000 hectares to 20.3m hectares its estimate for domestic soybean sowings for the forthcoming harvest, citing dry weather at planting time.

Soybeans for March gained 0.3% to $13.58 a bushel, while the better-traded May lot closed up 0.4% at $13.47 a bushel.

Soyoil helped by rising 0.7% to 40.82 cents a pound for May, lifted by a 1.7% rise in rival vegetable oil palm oil to 2,755 ringgit a tonne in Kuala Lumpur, the best close since September 2012.

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