Commodities found Friday heavy going, as the impact of China's poor manufacturing data hit home.

China's official purchasing managers' index dipped to 50.1, from 50.4 in January, a weaker figure than expected, and curbing some of the more bullish thoughts on demand for raw materials from a huge commodity importing country.

Indeed, the data, and the 0.4% rise in the safe have of the dollar that it fostered, were blamed for a decline of 0.9% in the CRB commodities index.

A firm dollar reduces the affordability to buyers in other currencies of dollar-denominated exports such as many commodities.

Struggle for gains

So it was little surprise that some of the agricultural commodities more heavily dependent on Chinese purchasing found headway difficult.

New York cotton for May wavered before posting a marginally positive close, up 0.1% at 85.40 cents a pound, the December contract showed a small decline, by 0.1% to 85.12 cents a pound, while the December contract showed a small decline, by 0.1% to 85.14 cents a pound.

And in Chicago, it was soybeans, of which China is responsible for nearly two-thirds of world imports, which fared worst among the big crops, standing 0.8% lower at $14.64 a bushel with some half an hour of trading to go.

May soybeans dropped 0.6% to $14.43 ½ a bushel, with the March lot ending down 0.7% at $14.64 ½ a bushel.

'Generally in a good condition'

Soybeans were little helped by revised data from Informa Economics which raised the estimate for the Brazilian crop by 1.3m tonnes to 70.6m tonnes, while keeping the estimate for Argentina's harvest at 51.0m tonnes.

That is a more bearish figure than it might appear, given the US Department of Agriculture figure of 53.0m tonnes, with many other observers, such as Lanworth, and the Buenos Aires and Rosario grain exchanges, dropping their estimates below 50m tonnes.

But the Argentine government provided extra reassurance, saying that soybean crops in parts of Buenos Aires province, for instance, were "generally in a good condition since the rains arrived", easing the fears over drought which peak in early-mid February.

Sowing incentives

There also appeared to be some profit-taking on spreads going on too, with Chicago soymeal, which has also been strong of late, falling 1.7% to $427.30 a tonne, while laggard soyoil jumped 1.3% to 49.47 cents a pound for March delivery.

This despite an eighth successive negative close by rival vegetable oil palm oil in Kuala Lumpur, down 1.2% at 2,367 ringgit a tonne, facing the extra pressure from ideas of huge inventories at ports in China, naturally a major importer.

And as an extra negative it looks like US farmers may have a slightly bigger incentive to plant soybeans this year, with Richard Feltes at RJ O'Brien noting talk that crop insurance prices, a big influence in farm sowing decisions, will be $5.65 a bushel for 2013 corn, and $12.87 a bushel for soybeans.

That would imply a ratio of 2.3:1 in soybeans' favour, compared with 2.2:1 last year.

 'Short squeeze in play'

However, grains did better, with much attention yet again on Chicago's March corn contract, in which there are ideas of holders of short positions being left in the lurch by the lack of grain up for delivery against the close-to-expiring lot.

"The March/May inversion in corn continues to build, pushing the $0.18-a-bushel level at one time today," Darrell Holaday at Country Futures said.

"The short squeeze is clearly in play."

Again, there were no deliveries against the March lot (nor, for that matter, in soybeans or soymeal either).

Cash vs futures

Grain Analyst, part of the Daniels Trading brokerage empire, said that corn market conditions could justify investors with long holdings in March futures maintaining their positions, despite the risk of being assigned delivery now that the lot is in the expiry process.

With cash market offering $0.32 a bushel more in Decatur, and $0.55 a bushel more in Gulf ports, farmers are unlikely to turn to futures to sell.

"The closer we get to March expiration, the closer the nearby March contract should get to the cash price," Grain Analyst said.

Added to all this "is an impressive week of export sales in corn for the US, with over 500,000 being confirmed" on Thursday, FC Stone noted.

Corn for March finished 0.7% higher at $7.24 ¼ a bushel in closing deals, with the May lot catching up in the end to add 0.7% to $7.08 ½ a bushel.

'China is looking for offers'

And this time, wheat kept up, proving one crop in which China looks increasingly interested in importing (although there is talk of the country lining up 2013-14 US corn too).

OK, industry portal China Cereal said the group was looking at selling 1.29m tonnes of wheat from state reserves between March 6 and 8, to ease a tight market ( which has supported ideas that last year's crop was nowhere near as high as official data show).

But thoughts of a sale have not significantly undermined prices, which have remained near record highs, prompting talk of more imports.

"I hear more chatter that China is looking for offers on US wheat and new crop corn," RJ O'Brien's Richard Feltes said.

'Buying interest picking up'

Nor is it the only purchaser in the market.

Jaime Nolan-Miralles at broker FCStone noted "buying interest picking up, with Saudi, South Korea and Bangladesh back in, with Tunisia also seeking 50,000 tonnes of optional origin wheat for April shipment".

Tunisia actually bought 50,000 tonnes of soft wheat from Glencore and Casillo at some $348 a tonne, including freight, and 25,000 tonnes of barley from Bunge at a little under $320 a tonne including freight.

And, on the production side, the outlook is not so favourable for drought-hit US winter wheat getting more rain, with weather service MDA noting in its latest 16-to-30 day forecast that "the precipitation outlook has trended drier across the south eastern Plains, northern Delta, and Midwest.

"Drier weather across the Plains and western Midwest will allow moisture to decline once again."

Chicago wheat for March closed up 0.8% at $7.13 ¼ a bushel, with the May lot up 0.9% at $7.20 ½ a bushel.

Coffee balance

Back in New York, arabica coffee managed to end a sideways week on a somewhat sideways note, adding 0.5% to 143.95 cents a pound for May delivery.

"On the negative side, there are still players speculating about an offer by Brazil of coffee in volume," Silas Brasileiro, executive president at the Conselho Nacional do Café said.

"However, many agents believe the market has taken account of this issue, and that the producers' strike in Colombia and the incidence of rust in many crops in Central America should support prices."