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Evening markets: Argentine rain dampens grains rally

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Monday made for difficult going for risk assets anyway.

Eurozone debt concerns revived with a failure by Greece to reach a deal with creditors to see of the risk of default, and with a European Union summit pushing the issue back up the agenda.

Meanwhile, China disappointed many investors by reopening after new year celebrations without easing monetary policy, as many had hoped, given a slowing economy and apparently retreating inflation threat.

"China returned from holiday with no new financial policy," Paul Georgy at broker Allendale noted.

Pakistan exports?

So

shares

dropped more than 1% in Frankfurt, London and Paris, while the safe haven of the

dollar

revived, making dollar-denominated assets less appealing to buyers in other currencies.

And, as if that were not enough for crops to crops to cope with, the news flow for crop fundamentals turned negative too.

Take

sugar

, where Scott Briggs at Australia & New Zealand Bank noted rumours that Pakistan was to release 250,000 tonnes for export.

"There is no confirmation as yet, but it doesn't help sentiment wise given Friday's announcement that Indian export quota may be increased at a February 7 meeting," Mr Briggs said.

Raw sugar for March closed down 1.5% at 23.85 cents a pound in New York, while London white sugar for the same month eased 0.5% to $634.20 a tonne.

Cocoa

for March plunged 5.2% to $2,280 a tonne in New York as the negative sentiment put a stop to short-covering and focused investors' attention on a deteriorated picture after the bean failed to break through its 100-day moving average.

'Reduced stress'

And, in Chicago,

soybeans

faced the price depressant of damper weather in Argentina, where drought has set back crops of the oilseed and corn too.

"The market reacted savagely to weekend rains in Argentina," Mr Briggs said.

And the particular setback for soybeans is that, as a later crop than corn, is has more chance of recovery from late rains.

"February is a key reproductive month [for soybeans] and the forecast is pointing to increase rainfall and moderate temperatures," Darrell Holaday at Country Futures said.

At weather service World Weather, Drew Lerner said that "sufficient rain will fall over the coming week to further reduce Argentina crop stress.

"Crop conditions will likely improve with the soon-to-be-reproducing soybeans, late

corn

and sorghum to benefit most from the next two weeks of rain."

'Slow soybean pace'

This on top of US export data (by cargo inspections) which did not impress, neither for soybeans, at 41.5m bushels (up week on week but down year on year) nor corn, at 22.5m bushels (lower on both scores).

US Commodities said it was "concerned with the slow soybean export pace, trailing last year's values by 417m bushels.

"South America competition is now closing in."

Mr Holaday said: "We mentioned last week that we have a lot of concern about the slow US export pace in the last month and that is a big factor in the sell-off today."

March soybeans ended down 2.8% at $11.85 ¼ a bushel.

'Basis is losing steam quickly'

For corn, at least, Monday's poor export data did not dampen expectations that US shipments will beat current US Department of Agriculture estimates.

Nor has the grain the same recovery potential from Argentine rains, as mentioned above.

But another support for corn, strong US cash prices, also began to crack.

"Basis is losing steam quickly and macros look to consolidate lower," GrainAnalyst.com trader Mathew Pierce said, adding that this was "not a good sign for all those on the bull side".

Corn for March closed down 1.6% at $6.31 ¾ a bushel in Chicago, after a seven-day winning streak.

'Huge, massive cold system'

Wheat

proved bulls' best bet of Chicago's big three, gaining some support from the cold weather providing a threat to winter grains in Russia and Ukraine.

"Over the next five days the main driving feature for Europe and Western Russia as well as the Ukraine will be the huge, massive Arctic high pressure system," weather service WxRisk.com said.

"This feature will simply dominate the weather maps for the next week - at least. Temperatures will run much below normal, and at times super below normal."

And, on export news, while weekly US exports were hardly booming, at 18.7m bushels, South Korea provided a boost by buying, cheaper, feed wheat over the weekend in place of corn.

'Drought expansion'

There was some potentially positive weather news for Minneapolis spring wheat, given the dearth of rain in northern US and into Canada, major growing areas.

"Strength due to drought expansion in northern [US] states is a positive impact on this market moving into planting," Mr Pierce said.

But Minneapolis wheat for March in the end closed down 0.9% at $8.19 a bushel, faring worse than Chicago wheat, which finished 0.4% lower at $6.44 ¾ a bushel.

Paris contracts did better, if only thanks to a weaker euro, with the March lot adding 0.1% to E209.00 a tonne.

London wheat for May fell 0.3% to £165.00 a tonne.

By Agrimoney.com

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