Could Chicago grain and oilseed futures stage one of their noted Turnaround Tuesdays?

Yes, at least in early deals, with soybeans, the biggest loser of late, leading, rebounding from a three-month closing low.

Upward movement was in line with the direction being taken on external markets, where concerns over China were trumped for now by a boost from stronger-than-expected US retail sales data and Citigroup earnings which beat forecasts.

Shares rose in Asian, by a hefty 1.4% in Tokyo, while the dollar eased 0.2% against a basket of currencies, a sign of a more risk-on feel besides boosting the competitiveness of dollar-denominated exports such as many commodities.

'Upcoming supply surge'

However, there was more to Chicago's recovery than that.

Sure, there may, in corn and especially soybeans, still be more selling pressure on the way from funds which still have unusually large bet long positions in futures and options.

At RJ O'Brien, Richard Feltes said: "It would appear that fund managers thinking long term are more concerned with an upcoming supply surge than old crop tightness," with South American harvests on their way early next year.

A backdrop of the "US fiscal cliff, slowing economic growth globally and an equity market than may be stalling out" may only be encouraging fund sales.

'Unwilling to sell'

However, have prices fallen enough to stimulate demand and revive the market?

"Conviction" in further downward movement in crop futures is being "undermined by traders unwilling to sell after a \$3.00-a-bushel break in soybeans and a \$1.00-a-bushel break in corn, against a backdrop of robust US soy export sales, and concern that the US is not rationing enough corn domestically," Mr Feltes said.

Historical analysis suggested that the US will need to cut feed use in the September-to-November quarter by 144m bushels, or 9.3%, to 1.4bn bushels to meet official targets for the full year.

"We are hard pressed to identify any livestock sectors that have cut back by 9%," he said.

'Cannot afford additional demand'

OK, for corn, US exports are coming in slow, with talk remaining of a large purchase bby US livestock feeders of Argentine grain in replacement for higher-priced domestic supplies.

And news of the closure of an ethanol plant in Vicksburg Mississippi, thanks to high grain prices, spoke of some demand rationing in that sector too.

However, are corn supplies too less generous than factored into official data?

"Many still believe corn harvested acres are overstated and the current 619m-bushel carryout projected is too high" in US Department of Agriculture estimates updated last week, Benson Quinn Commodities said.

"Therefore, we cannot afford to invite additional demand into this market."

Technical fillip

Furthermore, data overnight, showing the US corn harvest at 79% complete (fast, but no longer a record pace, and lagging 2010) and 71% of the soybean crop in the barn added to the idea that pressure on prices from the once-a-year boost to supplies might be easing too.

And November soybeans had a technical boost too from – just – holding over the \$15.04-a-bushel level, previously the October low, whose failure in the last session was seen as a big driver of fund selling.

The contract stood 0.8% higher at \$15.04 ½ a bushel as of 08:40 UK time (02:40 Chicago time).

December corn was up 0.5% at \$7.41 ¾ a bushel.

'Concern about establishment'

That was in line with wheat, which added 0.6% to \$8.53 ¼ a bushel for December delivery, gaining some support from USDA data overnight showing the continued slow emergence of the country's dryness-tested winter wheat crop.

While seedings were back on track, at 71% completed exactly in line with the typical pace, emergence remained behind the 44% average by now, standing at 36%.

"This may create some concern about establishment leading into winter, particularly in the northern plains were significant moisture deficits persist," Luke Mathews at Commonwealth Bank of Australia said.

Broader gains

The firmness was felt in New York too, where cotton for December added 1.2% to 73.20 cents a pound, extending a strong finish to the last session, and a rebound which has puzzled many traders, given huge world supplies of the fibre.

Raw sugar added 0.6% to 19.96 cents a pound too, despite the fundamental news appearing to turn against it, with Somar, the Brazilian weather consultants, forecasting dry weather for Brazil's main Centre South cane growing region to boost harvesting this week.

Still, both crops were underpinned by firm performances by Chinese futures overnight.

Even Kuala Lumpur palm oil, the agricultural commodity market's worst performer of late, managed a 1.2% gain to 2,500 ringgit a tonne.