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Evening markets: China data keeps crop futures on front foot

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China couldn't play second fiddle on commodities markets for long.

If prices owed very early optimism on Monday to hopes for a solution to the eurozone crisis, their continued strength was down in a large part to China too.

The country's manufacturing sector returned to growth after three months of contraction, an HSBC survey showed.

"Whether or not this results in a substantial increase is consumer demand remains to be seen, but positive growth reduces concerns about the Chinese economy taking a sharp downturn," broker Benson Quinn Commodities said.

Certainly, prices of many popular Chinese raw material imports soared, with


leaping 7% and New York


gaining 4.8% in late deals, when Wall Street shares were 1.0% higher.

'Imports were elevated'

Among farm commodities, popular Chinese buy-ins were in demand as well.


, of which China is also the top buyer, gained 1.2% to end at $12.26 ¾ a bushel in Chicago for November delivery.

And is the country becoming a big buyer of


too, with corn more expensive as a feed source?

Certainly, in addition to those rumours of purchases of Australian wheat, trade data on Monday showed China importing nearly 177,000 tonnes of the grain last month.

"China's wheat imports were elevated, coming in at their loftiest level since June, which was the highest level for imports since July 2007," Sudakshina Unnikrishnan at Barclays Capital noted.

Chicago wheat closed up 1.7% at $6.42 ½ a bushel for December.

Highest since March

Furthermore, buy-ins of


, of which China is also the top importer, beat expectations.

"China's cotton imports, which have been weak over recent months, came in at 252,700 tonnes – their highest level since March this year," Ms Unnikrishnan said.

New York cotton closed up 0.9% at 97.94 cents a pound in New York for December delivery.

Sweet tooth

And on something that China might become the top importer of,


, data were string too.

"China stayed a significant net sugar importer, at 465,000 tonnes, with imports rising successively for the past four months," Ms Unnikrishnan said.

"Due to a poor domestic crop in the key sugar-producing region of Guangxi, China's sugar imports are likely to stay elevated over coming months as it faces a domestic shortfall."

Commerzbank said: "With 1.67m tonnes in the first nine months of the year, China has already imported 22% more than in the same period a year ago."

New York raw sugar for March closed up 2.3% at 27.10 cents a pound, with London white sugar for December gaining 2.8% to $725.90 a tonne, with increasing fears for flooding in Thailand, the second largest exporter of the sweetener, also playing a role.

Rice swells

And all this before getting to the farm commodity most moved by the combination of ideas of Chinese buying and Thai inundations, as the floods reached Bangkok, forcing the evacuation of northern suburbs.

That commodity was


, of which Thailand is the top exporter, and China a small buyer, now speculated as likely to turn its purchases towards the US,

Rough rice for November closed up the maximum $0.50 allowed in Chicago to end at $16.905 a hundredweight.

"Going forth, we expect rice prices to propel higher, climbing a wall of worry underpinned by strong physical demand, especially in Asia where the grain is a food staple," Lynette Tan at Singapore-based Phillip Futures said.

Corn vs hay

Against this background, notable underperformer was


, which closed up 0.3% at $6.51 a bushel for December delivery, albeit with later contracts showing a little more strength, despite Chinese data showing a respectable 181,000 tonnes in imports of the grain last month.

Cattle on feed data released late on Friday were positive too, showing a record October population of cattle on US feedlots, meaning high feed use.

Indeed, a "surprisingly high" rate of placements in September of cattle on feedlots "is an indication that corn had gotten 'cheap' relative to forages", Purdue University farm economist Chris Hurt said.

And with placements of smaller cattle particularly strong, "the implication of placing such a large number of young calves is that they will be on feed a long time and eat a lot of feed grains".

Harvest pressure

However, against this is a rapid pace of US corn harvesting, leading to a short-term uptick in supplies, at least.

"Weather this past weekend should have allowed for harvest in most areas throughout the Midwest," Benson Quinn said.

"South America is getting rain or expected to receive moisture in the next few days," good for newly-sown corn, the broker added, although there is some dispute about how beneficial Argentine conditions are actually proving.

While the east of the country may get some rain, "over the next seven days, most of Argentina will see rainfall only 25% of normal", said.


Rain 200-400% of normal'

Still, the bigger dangers weather-wise seem to be over wheat areas, with the US southern Plains, where hard red winter wheat sowings are attempting to establish themselves, returning to dryness, as is Ukraine, where lack of rainfall is an issue too.

"The strong ridge in the jet stream over eastern Europe, the Ukraine, and western Russia will keep these areas dry and fairly mild," said.

And in Australia, there is a sense of déjà vu, with strong rains returning at not such an ideal time, with harvest in progress, or approaching.

Rainfall over the next week "will be close to normal over Victoria but 200% of normal over New South Wales, and 200-400% of normal over all of western and southern portions of Western Australia," the weather service said.


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