Agricultural commodities moved on Tuesday largely with the financial market mood - which showed signs of some recovery from a bleak start.

Sure, Asian stockmarkets extended the round of declines seen on Western peers in the last session, with Tokyo stocks dropped 1.9% and Hong Kong shares 2.3%.

The declines have been blamed on macroeconomic sentiment being soured by eurozone difficulties.

In Spain, the prime minister, Mariano Rajoy, has become engulfed in allegations that his centre-right Popular Party operated a slush fund from which it paid money to senior party leaders - including Mr Rajoy.

While Mr Rajoy has denied the claims, there have been calls for him to resign, and there are concerns that the furore could distract his administration from the necessary task of budget management.

In Italy, polls showing Silvio Berlusconi's centre-right coalition closing the gap on the ruling centre-left have provoked concerns among international investors over the future of Italy too.

Bullish spirit

But it looks like the bullish start to 2013, which has taken stock indices to multi-year highs, will need more than that to be pressed into reverse.

European stockmarkets opened firm, with London shares adding 0.3%, and commodities, even if some, such as copper, were still in negative ground as of 09:50 UK time (03:50 Chicago time), were off their lows.

Brent crude was up 0.2% at $115.80 a barrel.

'Getting more interested in sugar again'

New York raw sugar had even managed to recover from small losses to post modest gains, of 0.4%, taking it to 18.81 cents a pound for the March contract, amid an increasing focus on the prospects for ethanol taking a greater portion of Brazilian cane next year.

"Open interest inched up, indicating that investors are getting more interested in sugar again," said Joyce Liu at Phillip Futures, flagging the impact of a rise to 25%, from 20%, from June in Brazil's mandated blending mix of the biofuel into gasoline.

"The recent change in Brazilian biofuel policy may herald a turning point where, despite the large cane harvest," expected for this year, sugar prices "may find some support".

Copersucar, the Brazilian sugar and ethanol producer, said that the risk of cane going to ethanol would lend sugar prices firm support at about 18 cents a pound, if acknowledging that selling pressure would hamper gains above 20 cent a pound.

However, Luke Mathews at Commonwealth Bank of Australia noted that talk from the Kingsman sugar conference in Dubai "suggests prices will drop to 16 cents a pound before Brazilian mills switch significantly to ethanol".

'Drought remains worrisome'

New York cotton for March was also well off its lows, if proving less successful in actually making it into positive territory.

The fibre is being pressed by increasing stocks available for delivery against New York futures, with the total rising to 144,271 bales as of Monday, from 137,381 bales on Friday, and with a further 51, 133 awaiting review.

Furthermore, a large speculative net long position (which will require selling to be unwound) and a disappointing last US weekly export sales figure are weighing on sentiment.

The March contract stood 0.4% lower at 81.44 cents a pound, although more distant contracts were doing a little better, as in the last session, with the December lot down 0.2% at 81.35 cents a pound.

"Ongoing drought in the US Southern Plains remains worrisome for 2013-14 production prospects," Mr Mathews said.

More rains in Brazil

Still, where weather is really counting, of course, is in the grain and oilseed markets, with the concerns over Argentine dryness and, increasingly, overly wet conditions in Brazil too, which are now seen causing more than harvest delays and logistical hiccups.

AgRural and Celeres on Monday cut forecasts for Brazil's soybean crop, breaking a trend of upgrades, while Michael Cordonnier at Soybean and Corn Advisor cautioned over the poor quality of some of the crop coming off too.

And more rain is on its way, with WxRisk.com saying models "show significant rains over Parana, Sao Paulo, and southern Goias, and over 60% of Mato Grosso - 70%+ coverage of 1 to 5 inches" in the one-to-five day outlook.

Meanwhile, the models do not "have any significant rain in this time frame over Argentina, Paraguay, Rio Grande do Sul and Sanata Caterina", where precipitation is badly needed, the weather service added.

Argentine picture

Indeed, according to Commodity Weather Group, the dry part of Argentina's soybean area, at 40-45%, may be larger than many have perceived, and mean that the US Department of Agriculture is, with a forecast of 54.0m tonnes, overstating the crop by 3.25m-4.85m tonnes.

(The USDA will on Friday update its estimates, in its much-watched Wasde report on world crop supply and demand.)

That said, Richard Feltes at RJ O'Brien said that investors appeared, in lifting soybean prices by more than $1 a bushel from January lows, to have "fully discounted" a cut in Argentina's soybean crop of the level suggested by Commodity Weather Group.

"It is still too early to assume repeat of last year's 9m tonne January-to-final estimate decline in Argentine soy production—especially knowing the yield-boosting impact in the US last year of late summer rains," Mr Feltes added.

'Legitimate concern'

And these South American concerns are being debated, of course, as China is continuing to scoop up the oilseed, buying a further 116,000 tonnes from the US on Monday.

In fact, "these are expected to be last sales to China short term, with China going on holiday next week for lunar new year", Benson Quinn Commodities said.

Still, with weekly export inspections at 53.9m bushels last week, a record for the last week of January, accumulated shipments for 2012-13 are already bumper, topping 1.0bn bushels.

"This levels 340m bushels left to ship over the next seven months to meet the USDA export estimate of 1.345m bushels" for the full season, Benson Quinn said.

"There is very little room in the US balance sheet for any shipping disruptions in Brazil that could shift demand back to the US."

But with expectations of record-large Brazilian exports in March, "with harvest delays, the fear of shifting demand, while two months away, is a legitimate concern".

Corn downgrades?

Chicago soybeans for March in fact recovered early losses to rise 0.3% to $14.92 ¾ a bushel.

That outpaced again corn, the other major crop for which South American weather is a large concern, which added 0.25 cents to $7.34 ½ a bushel.

But then, a rapid pace of US exports is not on the radar for US corn, with weekly shipments coming in a meagre 5.3m bushels,

Indeed the underperformance of corn versus soybeans of late "suggests that the corn market fears another cut in 2012-13 US corn exports on Friday's Wasde report, in addition to a possible cut in old crop corn ethanol use as well".

'Pace must lift strongly'

In fact, even wheat was, unusually, doing better than corn, adding 0.3% to $7.56 a bushel, despite its own export data disappointing some observers, with actual shipments of 15.2m bushels last week below expectations, and the pace of export sales lagging too.

CBA's Luke Mathews said: "Total sales for the marketing year, which started on June 1, are down 11% year on year, and the pace must lift strongly if the USDA's existing forecasts are to be achieved" for the full 2012-13.

"If exports don't lift, US wheat ending stocks will be revised higher."

Benson Quinn Commodities said: "Weekly inspections were about 12m bushels below what needs to be averaged to meet the USDA's expectations."

'Impossible task'

The broker added: "Wheat exports could increase, but reaching the USDA's export expectations for 2012-13 is impossible.

"Hard red winter wheat exports have been the laggard, which has the potential to continue," a matter which could ease some of the concerns over the drought facing seedlings currently in the ground.

"The wheat market really needs some type of non-traditional export business," to prove its competitive muscle.

Still, Phillip Futures' Joyce Liu cautioned that wheat premium's over corn may have eroded too far, too fast.

"We see no reason for wheat to trade at less than a $0.30-a-bushel premium above corn, and we expect this margin to widen to about the $0.40 level.

"As such, we foresee wheat to be slightly more supported than corn in the coming days."