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Morning markets: grains extend falls. But cotton, sugar gain

Considerations in agricultural commodity markets aren't all about what Monday's numbers will bring.

OK, investors, overarching concern is what the US Department of Agriculture reveals in reports on domestic spring planting prospects, and on quarterly grain stocks, a briefing series with a particular reputation for causing moves in futures prices.

But another factor, plant shutdowns, has risen up the agenda too, in corn thanks to soft US ethanol production data.

The US Energy Information Administration on Wednesday reported weekly ethanol output down 6,000 barrels a day last week to 885,000 barrels a day, defying ideas that decent margins would stimulate production

It also kept production below the level of implied corn use, of more than 900,000 bushels (estimates differ, but all seem to agree on a figure beginning with a 9), needed to meet the USDA estimate of 5.0bn bushels for the full 2013-14.

'Struggle with getting production moved'

Logistical setbacks, related to hangovers from the cold US winter, were offered as a reason behind the shortfall.

"Storage remained tight for ethanol due to a lack of transportation," CHS Hedging said.

Brian Henry at Benson Quinn Commodities said: "Plants continue to struggle with getting production moved and many of them likely have more near term cash coverage than they need."

But the problem is that a catch-up in ethanol production back to the rate needed to meet USDA forecasts will come up against plant maintenance shutdowns.

According to Platts, many Midwest ethanol plants will shortly undergo spring maintenance turnarounds, despite ethanol prices it pegged at the highest in nearly eight years.

(Chicago ethanol futures are around their highest since July 2011.)

For instance, in Iowa, Flint Hills Resources will not accept corn at its 90m gallon a year plant, from March 31 to April 11, with Plymouth Energy down for a shorter period.

'Basis has advanced steadily'

In soybean processing, plant closures look like being a factor too, after a period of strong production to exploit decent crush margins.

"More US crush plants will be scheduling maintenance downtime in May/June following maximum winter production runs," Richard Feltes at RJ O'Brien said.

This will "trigger cuts in soymeal supply and gains in soymeal basis," he cautioned.

Already the "US soybean processor basis has advanced steadily" from a correction earlier this month, Mr Feltes noted.

Data later

Not that this was enough to lift soybeans, or soymeal, in early deals on Thursday.

Soybeans for May eased 0.3% to $14.35 a bushel as of 09:40 UK time (04:40 Chicago time), while May soymeal dropped 0.4% to $467.40 a short ton.

But these remain elevated price levels, with both lots within an ace of contract highs.

And there remains some data later today which could spur revivals, with the USDA to reveal weekly export sales, expected to come in at 100,000-250,000 tonnes for old crop soybeans, and 300,000-500,000 tonnes for new.

Balancing the books

Indeed, Mr Feltes said that the data are "poised to show further gains in US soymeal export sales globally and soybean shipments to China", a particularly important factor, given the underlying (and as yet largely unrealised) concerns over Chinese buyers cancelling import orders.

In fact, "evidence is mounting that there won't be enough unshipped Chinese soybean export sales left to cancel as solution to tight summer US soy supplies".

The USDA has been relying on the prospect of net cancellations of orders of US soybeans to ensure its balance sheet estimates for the oilseed tally in 2013-14.

Currently, the US has exported, or committed to export, 44.43m tonnes of soybeans for 2013-14 (finishing at the end of August), more than the 41.64m-tonne estimate for actual shipments.

'Tough to pinpoint supportive story'

For corn, export sales are pegged at 525,000-725,000 tonnes of old crop, and 0-200,000 tonnes for 2014-15.

Still, with today's shipment data not so crucial for the grain, more focus seemed to be on Monday's planting and, in particular, stocks briefings.

"I expect speculative length to continue to shed positions on modest rallies as the report approaches," Brian Henry at Benson Quinn Commodities said.

"Ahead of the report, it is tough to pinpoint where the supportive story is going to come from."

Corn for May eased 0.3% to $4.83 a bushel, falling below its 10-day moving average, but staying just ahead of the 20-day.

'Enough for a correction'

For wheat, a supportive story could come any time with a turn even drier in the US weather, although for now the falling of a few drops in the needy southern Plains was enough to keep the pressure on prices.

"Rain in the hard red winter wheat area, northern Texas and western Oklahoma, with forecasts for more in April" had "lent pressure" to the wheat complex, CHS Hedging said.

"A large portion of the Plains are still dry, but water actually falling was enough for a correction lower on Wednesday."

At Phillip Futures, Vanessa Tan said that whole rains were "necessary" given the declining condition of US winter wheat, underlined by USDA reports on Monday, "it remains to be seen how much benefit the rainfall can provide to the US winter wheat crop".

Prices ease

Benson Quinn Commodities said "this moisture isn't the type that will make or break a crop over the long run".

However, given the "near-constant buying of the past two months that took place in Kansas City first and foremost" even the "headline" of rainfall "was all it took" to undermine prices.

And, as an extra setback, Egypt, the top wheat importer, said it was aiming to cut buy-ins by 1m-1.5m tonnes in 2014-15.

Kansas City-traded hard red winter wheat for May fell 0.8% to $7.65 a bushel, while Chicago soft red winter wheat for May dropped 0.6% to $6.92 a bushel, below its 10-day moving average.

Limit up

Among soft commodities, cotton continued to be difficult to predict, recovering ground despite talk that China, the world's top importer of the fibre, is to act to curtail inward shipments in an effort to erode its huge stockpile.

The government is apparently from next month to give mills one tonne of import quota for every tonne of cotton purchases from state reserves, compared with an existing ratio of 1:3.

Still, New York cotton for May was 1.7% higher at 93.23 cents a pound.

China was less equivocally helpful to New York raw sugar futures, which rose 1.2% to 17.57 cents a pound.

Earlier, the best-traded September contract on China's Zhengzhou exchange closed up 2.6% at 4,752 yuan a tonne, touching the upward trading limit of 4,818 yuan a tonne earlier.

Evening markets: cotton, wheat retreat. But sugar in demand
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