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Evening markets: soybean futures recover, outpacing grains

The idea of the tumble in equities providing some relief to commodities carried a bit of weight.

While shares dropped 1.6% in London, and more than 2% in Paris and Frankfurt, with Wall Street stocks down 1.7% in late deals, commodities overall had a positive day.

The CRB commodities index gained 0.4%, extending its headway from a low two weeks ago nearly to 4%.

But the headline figure disguised quite some disparity among agricultural commodities, with a positive session not to be taken for granted.

'Demand remains impressive'

Sure, Chicago soybeans managed it, adding 0.6% to $12.84 a bushel for March delivery, supported by strong US export sales data, of 1.68m tonnes for last week.

"That is almost three times the expected range," CHS Hedging said, adding that "soybean demand remains impressive".

In fact, it was the best figure in two months and, what's more, showed no evidence of cancellations by China of cargos, in favour of Brazilian export coming on stream now harvest has begun in earnest.

Brazil dynamics

Not that the ideas of Chinese cancellations have gone away.

"Traders continue to anticipate the Chinese to cancel purchases of US soybeans as Brazilian harvest ramps up," US Commodities said.

"They have nearly 8.0m tonnes of US bean shipments that could get switched out for South American beans," CHS said.

"Current pricing is now as much as 1.00 per bushel advantage for South America", said Allendale, adding that Brazil's "harvest is progressing and yields are above average".

Indeed, US Commodities said that "early Brazil yields are 8-15% larger, but harvest is 3% complete".

'One-third of soy areas at risk'

However, there remain some weather pressures in South America

"Brazil's Rio Grande do Sul this weekend is slated for good rains, but a dry trend thereafter could put one-third of soy areas at risk," said Richard Feltes at RJ O'Brien.

And then there is the Argentine currency to deal with.

Sure, "the industry believes there are 9m-11m tonnes of old crop soybeans on the farms or Argentine producers," said Darrell Holaday at Country Futures.

But they are only likely to accelerate sales when it looks like holding pesos is a reasonable bet compared with a dollar-denominated crop.

Still, "there are many that believe that the Argentine government will be forced to move to a floating rate," Mr Holaday said.

"That would allow producers to sell their cash soybeans and then convert their peso to US dollars immediately."

Also helping soybeans was a decent performance by soymeal, which added 1.7% to $425.70 a short ton, clambering back over its major moving averages, buoyed by weekly US export sales of 241,000 tonnes, compared with market expectations of at best 150,000 tonnes.

Strong exports sales

There has been something of a negative correlation between soybeans and grains of late, a reflection in part of the moves in long soybean-short corn/wheat spreads which have been popular.

Corn certainly lagged although, in ending at $4.29 a bushel for March delivery, it did manage a 0.1% gain.

Export sales for the grain were strong too, at 693,000 tonnes, more than twice some expectations, and including some (75,900 tonnes) from China, despite the rejection of a stack of cargos of US grain for containing a GM variety not approved in Beijing.

In fact, "the China GMO dispute has not been resolved yet," CHS Hedging said.

"Ideas are that it could take until the end of March or possibly June before a resolution is made. In the meantime there is the potential for more US corn shipments to get cancelled."

'Temperatures are looking even colder'

But for wheat, export sales were 413,000 tonnes old crop and new combined not a disaster, but towards the lower end of market expectations.

That overhung the market, offsetting some of the positive pressure from signs of decent international demand, and from cold US weather, not ideal for winter wheat seedlings lacking a snow blanket.

"US temperatures are looking even colder next week, and are thus supportive to corn and wheat due to slower logistics and potential winterkill on unprotected winter wheat," Richard Feltes at RJ O'Brien said.

"Portions of Missouri, the eastern Plains and southern Illinois, and eastern Kentucky/Tennessee lack protective snow cover."

'Selling opportunities'

Benson Quinn Commodities downplayed ideas of support from weather or signs of active importers, saying that "the wheat market has shown slight improvement on the technical studies, but lacks a fundamental reason for the trade to pay up to secure supply".

Chicago wheat for March indeed ended down 0.8% at $5.65 a bushel.

In Paris, wheat for March ended down 0.4% at E189.75 a tonne, while London wheat for March eased 5p to £151.95 a tonne.

"On paper there is still plenty of UK grain around, and in this situation rallies are selling opportunities," grain merchant Gleadell said.

Sugar recovers

Among soft commodities, a stable Brazilian real helped, in at least ensuring no extra pressure on values of the likes of coffee and raw sugar, of which the country is the top producer and exporter.

In fact, raw sugar climbed 0.5% to 15.11 cents a pound, a rise seen largely down to technical factors.

"There are some suggestions, essentially oversold indicators, that the support seen in the last couple of sessions points to correction," Sucden Financial said, noting the potential for hedge fund positioning data later on Friday to show a huge net short position, raising questions of how much more unspent selling pressure remains.

However, arabica coffee for March eased 0.7% to 144.40 cents a pound.

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