What could overshadow the keynote annual US Department of Agriculture Outlook conference, telling investors what to expect from the world's most important farming force, at a time of record food prices?

Oil, of course. Investors really only had one thing on their mind - the black stuff.

What does Libya's turmoil means for crude prices? What price sends the world back into recession? What happens if unrest spreads? (And concerns of contagion are rife, spreading even to Turkey on the other side of the Mediterranean to Libya, where Istanbul shares fell 4% and the cost of insuring against sovereign default rose.)

Grains vs crude 

And many assets, including farm commodities, operated on something of an inverse pattern with oil prices.

"Grains continue to separate from the crude, just the opposite of what's been happening for weeks and months," Jerry Stowell at Country Futures said.

"Now, all of a sudden, funds who are big longs [in crops] are nervous about what $100 oil will do to world economics."

As oil rose early on - when Brent crude hit $119.79 a barrel and New York crude reached $103.41 a barrel – food commodities dipped. Chicago soybeans, for instance, fell back below $13 a bushel.

Back from the worst 

But Saudi Arabia's proposal to lift its own supplies, bringing oil prices back (and indeed, sending them into negative territory late on Thursday), released some of the strain on crops.

Not all the pressure. Chicago wheat for March, for instance, closed down 2.1% at a two month low of $7.47 ¼ a bushel, taking losses from a February 9 high to 16%.

Oats for March plunged 4.0% to $3.60 ¼ a bushel.

But at least contracts closed above intraday lows. Corn, for instance, regained half its losses to finish down 0.8% at $6.80 a bushel.

Soybeans nearly managed a positive finish, before easing at the death to end down 0.1% at $13.18 ¼ a bushel.

'Value purchases' 

The thing was, as Benson Quinn Commodities said, that "end users can find value near these levels", as Tunisia reminded markets by buying 75,000 tonnes of wheat, while the Korea Corn Processing Industry Association snapped up 55,000 tonnes of corn.

In Europe, weekly wheat export data were firm too, at 439,000 tonnes, the best figure since mid-January, and defying expectations of a weak second half of 2010-11 for European Union shipments of the grain.

Indeed, Paris wheat for March ended a topsy-turvy day just on the topsy side, up 0.2% at E247.00 a tonne, while London wheat for May added 2.8% to £200.50 a tonne, helped by flagging sterling, which suffered especially from oil-harming-economy fears.

USDA outlook 

And that's before getting to the USDA outlook data which at a headline level were bearish – the estimate for US sowings was left at 92m acres, the second highest since World War II, with soybeans set for their biggest-ever plantings.

Nonetheless, factor in robust consumption from the biofuels sector, and resilient exports, and the year-end stocks picture was not much less tight than that expected for 2010-11.

"The projected stocks to use ratio of 6.4% in corn is not real comforting as weather risk premium will likely be a big factor during the growing season," Benson Quinn said.

"The demand next year is expected to remain strong," US Commodities said.

"We will need good growing conditions. Yields cannot be reduced or we will have the same situation as this year."

Colombia fillip 

Soft commodities proved vulnerable to a bit of selling again too.

Even cocoa, which edged to a fresh 32-year high, for a nearest-but-one contract, of $3,645 a tonne in New York, for May delivery, before easing to close down at $3,625 a tonne, down 0.2% on the day, as the urge to take profits overcame concerns at the unrest in top producer Ivory Coast.

And even coffee, analysts' darling of late, which fell 1.7% to 264.20 cents a pound in New York for March, and by 1.8% to 246.65 cents a pound for May, after Colombia's coffee federation forecast a somewhat brighter outlook for production, pegging it at 9m-9.5m bags.

While below the 12m bags seen in the past, it is an improvement on weather, disease and replanting-hit harvests of 8m-9m bags seen in the last couple of seasons.

Sugar, meanwhile, gained 0.9% to 30.22 cents a pound for March delivery, boosted somewhat by its role as a bioethanol feedstock, and so a beneficiary on that score from strong oil.