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Evening markets: big data day scars grains. But softs thrive

Soft commodities emerged rather better than grains and oilseeds from the mega-data day on Tuesday.

In fact, conditions were broadly positive for commodities, helped by factors such as an easing dollar, which dropped 0.3% against a basket of currencies.

A weaker dollar boosts prices of dollar-denominated commodities by making them more affordable to buyers in other currencies.

The CRB commodities index added 0.6%, continuing a marked rebound from a November 19 low, when it hit its weakest since June last year.

Scorching coffee

But softs proved far better than their grain peers at trapping the tailwinds, with robusta coffee soaring 4.0% to $1,793 a tonne for March in London, a three-month closing high for a nearest-but-one contract.

The jump was attributed to the continued success of Vietnamese growers, the world's biggest robusta producers, in lifting prices by squeezing supplies despite an ongoing record harvest, and provoking short-covering among speculators.

Prices in Vietnam, itself hit a nine-week high of 35,000-35,500 dong per kilogram, equivalent to $1,660-1,680 per tonne, on Tuesday in Daklak, the country's lop coffee-growing province, rising from 33,900 dong per kilo on Monday.

This time the rise in prices fed through to New York arabica beans too, which ended 3.9% higher at 110.25 cents a pound for March delivery.

Sweet and sour

Raw sugar for March closed up 0.4% at 16.62 cents a pound in New York, with a surprisingly large slowdown in Brazilian Centre South production in the second half of November, shown in industry data, giving encouragement to bulls who have had a rough time of it of late.

In fact, they may have been on for another negative session were it not for the Brazil data, with Kingsman earlier helping press prices into the red by upgrading its forecast for the world sugar production surplus in 2013-14, by 900,000 tonne to 4.5m tonnes.

The group in fact cited strong production in Brazil, and in northern hemisphere countries, as behind its upgrade.

"Although we have slightly increased our estimate for global consumption for 2013-14, these better crops more than offset our increase in estimated consumption, and our estimated surplus has grown," Swiss-based Kingsman said.

'Justifies the rallies'

But for grain bulls, gains were harder to come by, despite some potentially positive signals in the slew of data from Brazil's Conab crop bureau and the US Department of Agriculture, (besides from the Malaysian Palm Oil Board earlier).

Corn, for instance, had the bullish dynamic of a larger-than-expected cut by the USDA to its estimate for domestic inventories as of the end of 2013-14, and for world stocks too.

"Row crop demand categories saw incremental increase this month, generally tracking the recent use patterns," CHS Hedging noted.

"That made for declines in US corn stocks," and for the soybean inventory estimate too.

"The row crops have been on rallies, so today's report confirming better demand justifies those rallies," the broker added.

'Large South American crop'

But the data failed to enable price gains to continue, with corn for March closing down 0.5% at $4.36 a bushel in Chicago.

Soybeans for January fell 0.4% to $13.38 a bushel, despite the inventory estimates for the oilseed too also falling short of market expectations.

"This market is still staring a large South American soybean crop with the possibility that it could push 160m tonnes," Darrell Holaday at Country Futures said.

The USDA, after all, raised its forecast for the Argentine crop to a record-equalling 54.5m tonnes, while Conab was upbeat over the Brazilian harvest, putting it at 90.0m tonnes.

'More bearish than our expectations'

One major problem was wheat, for which the USDA raised its forecast for domestic and world inventories to levels well above market expectations, citing the recent upgrades to Australian and, in particular, Canadian crops.

USDA officials failed, however, to factor in the lowly 8.5m tonnes at which Argentina has pegged its harvest, and kept their own forecast at 11.0m tonnes.

"Of the three major exporters that were in focus this month-Canada, Australia, and Argentina- the USDA did exactly what most expected," CHS said.

"That is, it adjusted Canadian and Australian production higher in keeping with government forecasts, and ignored the less reliable Argentine government forecast."

Mr Holaday said. "We expected the wheat numbers to be bearish, but the US number was a little more bearish than our expectations. "

'Still struggling with Canada'

Wheat futures for March closed down 1.8% at $6.38 a bushel in Chicago, the weakest close for a nearest-but-one contract since June last year.

"That market is still struggling with the Canadian crop surprise from earlier this month, and offsetting export demand has yet to develop," CHS said.

The weakness spread to Europe too, where Paris wheat for January closed down 1.6% at E205.75 a tonne, while its London peer shed 1.0% to 162.80 a tonne, a two-month closing low.

Canola correction

Also in Paris, rapeseed ended lower too, down 1.8% at E365.25 a tonne, after the USDA Wasde report lifted the estimate for world production of the oilseed by 2.1m tonnes to 70.0m tonnes, citing upgrades to Australian and Canadian crops.

In Canada itself, canola, the rapeseed variant, continued its downward correction, tumbling 2.4% to Can$454.90 a tonne, the weakest close in three years.

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Evening markets: big data day scars grains. But softs thrive
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