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Evening markets: corn prices hold firm even as soy struggles
By Agrimoney.com - Published 23/12/2013

If Santa is going to give agricultural commodity bulls a Christmas present, he is saving it for the last minute.

Crops headed for Monday's close in a negative mood, both in grains and soft commodity markets.

Even Chicago's stalwart of late, soybeans, traded lower, down 0.7% at \$13.22 a bushel for March delivery with some 10 minutes trading to go, as the support from Argentine weather concerns faded a little.

'Less heat and more rainfall'

"The soybean market surged higher out of the gate last night, but quickly gave up ground," Darrell Holaday at Country Futures said.

Indeed, earlier, the contract set a three-month high of \$13.39 a bushel.

"As the trade has progressed the models have indicated less heat and more rainfall in Argentina. That has weakened values but it has not been dramatic," he said.

It is the heat and dryness in some parts of Argentina which has been worrying investors.

Benson Quinn Commodities said: "There are contrasting two week weather forecasts for Argentina with some models indicating a relatively dry two week period, while other models offer better rain totals and better coverage.

"The trade will keep a close eye on the potential development of a high pressure ridge through the end of this week."

'Crush margins have weakened'

Meanwhile, although China confirmed soybean imports at a bumper 6m tonnes last month, there were some negative interpretations of that too, in building domestic stocks.

"The trade will keep a close eye on China as crush margins have weakened due to a significant increase in port supplies," Benson Quinn said.

As an extra setback for soybeans, soymeal weakened too, falling 0.7% to \$430.40 a short ton for March delivery.

"Watch the soymeal market," Mr Holaday advised.

"That is the strongest market on the screen. If it gets in trouble, the soybean market will retreat quickly."

Corn gains

Investors quitting soybeans was not all negative for grains, with the sales bringing the unwinding of long soy/short corn spreads, in turn implying buying of Chicago corn.

Corn, up 0.2% at \$4.34  bushel for March, gained further support from ideas that US exporters are continuing to ship the grain to China, despite the rejection of some US corn cargoes, on grounds of containing a genetically modified variety unapproved in Beijing.

China's November corn imports, at nearly 800,000 tonnes, were more than double those a year before.

Furthermore, the "technical structure of the market is trying to shift to a more supportive stance, which would offer a better chance of short covering by the funds and we approach index fund buying in early January", Benson Quinn said.

'Surprise!'

However, the buoyancy failed to spread to wheat, which shed 0.5% to \$6.10 a bushel for March delivery.

"Surprise! No new contract lows in wheat overnight," CHS Hedging said, if looking a bit premature when the grain came 1 cent a bushel from matching its low for the March lot.

Sure Australian Crop Forecasters pegged Australia's wheat crop at 25.2m tonnes, 1.0m tonnes below the official estimate.

But, with hopes improving for Ukraine's 2014 crop, that was not enough to inject confidence into a market in which hedge funds are increasingly confident in their net short position, raising it indeed to a record high in Chicago.

"The technical structure in the wheat market is trying to improve, but finding willing buyers at prices as little as 3 to 4 cents higher has been difficult," Benson Quinn said.

'Merely a correction'

Among soft commodities, cocoa eased 0.4% to \$2,808 a tonne, depressed by profit-taking, after gains based on persistent ideas that the industry faces successive years of global production deficits.

And raw sugar dropped 1.0% to 16.28 cents a pound, as a two-day rally foundered.

"Whilst this corrective rally was not unexpected, given the long downtrend seen recently and the technically oversold condition of the market, we feel it was merely a correction," Nick Penney, senior trader at Sucden Financial said.

"There is a long way to go before anybody would dare call this a change in trend."

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