It was a tale of two markets on Monday � gaining grains and soft softs, as the trend of fund flows reversed from that typical last month.

Funds were huge buyers of corn, snapping up an estimated 12,000 contracts with 20 minutes or so of trading yet to go.  And, indeed, it was corn which led a substantial rally in Chicago.

Sugar, however, slumped 7%, as funds got cold feet that the strength of demand from physical buyers was enough to warrant elevated prices. The slide led a pretty much across-the-board slide in the softs complex.

"New York's decline turned into a rout as the market fell 550 points and any minor optimistic signals in the market last week were completely negated," Ralph Hawes, at Sucden Financial, said, in comments aimed at arabica coffee beans, but pretty applicable to other soft commodities too.

The brightest spot was cocoa, which lost a modest 0.1% in London, for March delivery, and 0.8% in New York.

Its relative resilience was attributed largely to the unrest in Ivory Coast, which continues to stimulate concerns about supplies from the world's biggest cocoa producer.

Energy factor? 

But why favour corn? It was a question which perplexed many observers, including Darrel Holaday at broker Country Futures, who attributed it potentially to the grain's use in making biofuels, which ties its fate somewhat to oil prices.

"It is a little difficult to explain the move in corn other than it is making up some ground to the energy sector that was much stronger than the corn was last year," he said.

Other explanations include wet weather in South America, which has provided too much of a good thing for some corn crops, as well as soybeans.

Brazil's Cordoba and two other major Brazilian soybean states witnessed up to four inches of rain over the weekend.

US rain 

Weather forecasts for the US are raising eyebrows too, Vic Lespinasse at GrainAnalyst.com pointed out.

"Talk about wet conditions currently in much of the Midwest and more of the same in the forecast have generated growing concern about possible early spring planting delays for corn," he said.

"There is also concern about widespread heavy snow cover, which could cause some flooding when it melts in the spring."

'Vulnerable to short covering'

And then there was analysis of the good-old weekly data on investors' positions in US markets, which showed funds and speculators with bigger balances of short positions than has historically been the case.

"While traditional funds had trimmed their net short positions in wheat corn and beans, traders still view [the crops] as vulnerable to additional short covering," Benson Quinn Commodities said.

Whichever reason ruled, Chicago corn for March closed up 3.2% at $3.71 � a bushel, its highest finish of the month.

That helped March wheat jump 2.4% to $5.01 � a bushel, while soybeans ended up 1,8% at $9.61 � a bushel, after a three-day losing streak.

The late-weighting of the revival meant that it was only modestly reflected in European markets, where London wheat for March closed up �0.75 at �93.20 a tonne, while Paris wheat ended E0.25 higher at E122.50 a tone.

Sweet goes sour

Still, long investors in softs might have welcomed even rises of that level rather than the 7.5% slump to 24.95 cents a pound that New York raw sugar for March meted out on investors.

London white sugar's drop of 2.7% to a 2010 low of $687.10 a tonne, for May delivery, was perhaps less surprising, given the extra 500,000 tonnes of European Union supplies coming onto the market.

"Some feel that there may be even more available," David Sadler at Sucden Financial Sugar said.

The steeper drop in New York may have had something to do with investor position data, with many believing the market overbought, and so vulnerable to a selling wave.

"The latest data shows that as of last Tuesday the index funds increased their long positions by 11,482 lots and other funds and speculators added a further 12,291 lots to their longs," Mr Sadler said, pointing out that many positions may since have been closed.