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Evening markets: data doubts stall corn rally, But soy soars

So just how realistic was the cut to the official estimate for US corn supplies, which sent prices soaring in the last session?

The US Department of Agriculture, which on Friday cut its estimate for domestic corn stocks at the end of 2013-14 by 161m bushels to 1.63bn bushels, had two decent reasons for the downgrade.

The harvest last year had been smaller than had been thought, and consumption bigger than expected too in the autumn, to judge by stocks data as of December 1.

Indeed, factoring out ethanol production and exports, it implied feed use at a record high 2.4bn bushels for the preceding three months.

'A little hefty'

However, as so often after key US ag data, some scepticism emerged.

Had use really been that big, or was the feed use estimate in fact exaggerated by one-off restocking after a 2012-13 which, after all, was notable for its tight corn supplies, and high prices?

The implied feed use number "seems a little hefty given the overall cattle supplies", Darrell Holaday at Country Futures said.

"But many times feed use coming off of a very short crop year is a function of filling inventories in the first quarter and has really not actually been fed - in other words filling a pipeline that was very low."

Broker outlooks

Investors' willingness to chase the market higher was also undermined by caution by Goldman Sachs, which raised its forecast for Chicago corn prices, but to levels beneath the futures curve.

(That said, Morgan Stanley, one of the few commentators to predict correctly the USDA downgrade to its 2013 US corn production forecast, took a less downbeat line.)

And US weekly exports, as measured by cargo inspections, weren't great, at 20.9m bushels.

"Corn posted a bit less than expected," CHS Hedging said.

Corn for March added 0.4% to $4.34 a bushel, gained which paled against the 5% headway in the last session, if enough to keep the contract above its 10-day, 20-day and 50-day moving averages, the latter of which it has now closed over twice since August.

'Came in good'

For soybeans, the US weekly export data were altogether more impressive, at 59.4m bushels.

"Weekly export inspections came in good this morning for soybeans," CHS said.

And, as an extra fillip, 43.6m bushels of that went to China, the top importer, whose appetite for US soybeans has been questioned on two fronts.

The first is whether China will start rejecting soybean cargoes, as it has corn; and the second, the potential that buyers will switch to South American supplies, now that the Brazilian harvest is ramping up.

Export data

However, the Chinese export figure was "always positive because every bushel actually inspected for export cannot be cancelled", Country Futures' Mr Holaday said.

"Sales can be cancelled, but loaded ships are not cancelled."

Besides this, the USDA revealed the sale of 140,000 tonnes of soybeans to an unknown importer for 2013-14, while soymeal had a strong session, soaring 2.0% to $421.90 a short ton for March delivery.

And technically, "the March soybean contract has established trade above the 200-day moving average, which could attract buying," Benson Quinn Commodities noted.

In fact, the March soybean contract added 1.2% to close at $12.94 a bushel, retaking its 10-day, 50-day and 75-day moving averages too.

Argentine upgrade

Wheat also outperformed corn, adding 0.8% to $5.73 a bushel in Chicago for March delivery, boosted by its own solid export news.

Besides the Egyptian order of 55,000 tonnes over the weekend, US export inspections came in at 25.2m bushels, nearly twice the figure the previous week.

That helped overcome some of the bearish news around, with Argentina raising its estimate for the domestic wheat crop by 200,000 tonnes to 9.2m tonnes, and approving 1.5m tonnes for export.

Also, Goldman Sachs downgraded its forecast for Chicago wheat prices, following Friday's downbeat USDA numbers.

Cocoa upgrade 

Among soft commodities, Goldman also upgraded its estimate for cocoa prices, citing forecast for successive seasons of world production shortfall.

However, the bank's forecast remained below the futures curve, a reflection of the stronger-than-expected start to producer deliveries in Ivory Coast, the top cocoa-producing country.

Cocoa for March closed unchanged at $2,712 a tonne in New York, but did add 0.6% to £1,744 a tonne in London for March.

Traders are also positioning ahead of European cocoa grind data, on Wednesday, expected to show a rise of about 5% for the October-to-December quarter.

Sugar sweetens

Raw sugar for March added 0.2% to 15.60 cents a pound in New York.

The world sugar production surplus "is not as big as it appeared to be at this time last year," Marex Spectron noted.

"The world producton trend looks as if it is heading down, while world consumption continues to grow," the broker said.

"And now there is a further reasons for thinking that the flat price decline should stop the market has gone into a fairly steep contago," meaning the market is paying investors to hold stocks.

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