Will Thursday bring soybeans their first negative close of the week?

For many financial markets - commodities included - Thursday bought a brighter tone, after the latest meeting by the US central bank's interest rate setting committee made no change to its easy monetary policy stance, involving the purchase \$40bn in mortgage-backed debt per month.

The continuation of the policy, the third round of quantitative easing, or QE3, aimed at depressing interest rates and boosting economic recovery, "would mean that the dollar will stay under pressure, which is supportive of commodities prices," China Futures said.

A weaker dollar improves the affordability of dollar-denominated assets, including many commodities.

China auction

Brent crude added 0.5% to pop back up over \$108 a barrel as of 08:30 UK time (03:30 New York time, 02:30 Chicago time) while London copper rose for its first session in four.

Cotton, as an industrial commodity more attuned than many other crops to broader economic sentiment, added 0.3% to 72.87 cents a pound in New York, for December delivery.

But Chicago soybeans set aim at their first loss in four sessions, depressed in part by the weak take-up of the oilseed at China's latest auction from state inventories.

Only 39,000 tonnes of the 398,000 tonnes of soybean reserves up for sale were actually sold, potentially a sign of easier supplies in the top importer of the oilseed.

That said, there was some talk that the price of 4,500 yuan a tonne was not so much of a bargain compared with cash market prices, although futures on the Dalian exchange were trading over 4,700 yuan a tonne for both the November and better-traded January lots.

Wetter weather

Furthermore, the oilseed felt the weight of improved weather forecasts for South America,

"South American weather is the wild card should conditions continue on the dry side," Mike Mawdsley at Market 1 said.

Benson Quinn Commodities said: "Any weather concerns that would develop mid-December would certainly warrant weather risk premiums to be added," with the world relying on the continent to replenish waning world reserves of the oilseed.

"The current forecast though for Brazil is wetter in the eight-to-10 day outlook and remains favourable as planting progresses."

November soybeans eased 0.4% to \$15.65 a bushel.

'Production is trailing estimates'

For once, soybeans were healthily outperformed by corn, which added 0.2% to \$7.56 ¼ a bushel, defying a rash of negative sentiment over the grain, given evidence of high prices slowing demand.

Luke Mathews at Commonwealth Bank of Australia flagged "the recent slowdown in corn demand, the seasonal increase in US supplies and weak crude oil prices", with crude significant given the grain's huge use in making ethanol.

Latest ethanol production data, on Wednesday, showed output at 801,000 barrels per day last week, up 4,000 barrels per day week on week, but well below the 909,000 barrels a year before.

In fact, "the current pace of production will not meet the US Department of Agriculture's 4.50bn bushels of corn pegged for ethanol this marketing year", Benson Quinn Commodities said.

"The fact that production is trailing estimates during harvest coupled with sluggish demand for gasoline and the possibility that corn used for ethanol and by products could be revised lower is looking more and more feasible."

Brazil move

At Market 1, Mike Mawdsley added: "The ethanol report again showed how much we are below last year.

"This is something everyone knows, but we are reminded about it every Wednesday morning."

However, at least in corn's favour was talk that Brazil will next year raise its ethanol blend levels in gasoline back to 25% from 20%, meaning extra domestic use, and lowering the country's threat as an export competitor to US supplies.

Furthermore, options expiry on Friday may be throwing some unusual forces at corn prices, with contracts grouped around \$7.50 a bushel.

Brazil's switch to producing more ethanol would mean competition for cane with sugar, which edged 0.3% higher to 19.74 cents a pound in New York, for March delivery.

'Clear as mud'

Still, back in Chicago it was wheat which remained the strongest of the exchange's big three crops, adding 0.3% to \$8.86 ½ a bushel.

OK, there is still some doubt over the Ukraine wheat export ban, after a spokesman for the prime minister contradicted the farm minister, and said restrictions had not been decided upon.

"The situation is clear as mud and communication within the Ukrainian cabinet could do with some improvement," CBA's Luke Mathews said.

"Nonetheless, in our opinion, such focus on a formal export ban is somewhat irrelevant.

"The Ukrainians, and Russians for that matter, will soon exhaust of exportable supplies and uncompetitive pricing means they won't be a feature of the global market in the first quarter of 2013."

Chart signal

Furthermore, there are weather fears over crops in Argentina – too wet - and Australia – too dry - as harvesting ramps up.

And as for northern hemisphere countries undertaking sowings for 2013 harvest, "dry weather concerns in Russia and the US Plains dampen the prospects for the winter wheat crop", Lynette Tan at Phillip Futures said.

Technically, the December wheat contract also had the fillip of closing over its 50-day moving average in the last session for the first time in more than a month, a likely green signal for fund buying.

Data later

Still, where crops close may depend largely on export sales data due later, which for wheat is expected to show a figure of 250,000-400,000 tonnes, potentially matching teh 410,000 tonnes last time.

For corn, the market expects export sales of 150,000-375,000 tonnes, meaning potentially double the 167,000 tonnes the previous week. Corn exports have had a habit of disappointing, but the competitive advantage of South American supplies is waning.

Soybean export sales are seen reaching 600,000-900,000 tonnes ahead of the previous week's 525,000 tonnes.