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Evening markets: China economy slowdown presses on crops

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It was a tricky start to the week for risk assets. Even

soybeans

dropped, bringing the oilseed its first drop in Chicago for 11 trading days.

Sure, gains were possible, as

cotton

showed, soaring the exchange limit of 4.0 cents to hit 92.23 cents a pound in New York for May delivery after India, the second-ranked shipper of the fibre, banned shipments.

The little-traded March lot, freed from trading limits by the expiry process, jumped 5.25 cents, or 6.0%, to 92.71 cents a pound.

'Excessive wetness'

And in Chicago,

corn

managed gains too, as rain welcome for much of the Midwest turned into a surfeit for some parts, with Gail Martell at Martell Crop Projections noting "excessive wetness" in Indiana and Ohio.

"Indiana has accrued a 10-inch moisture surplus since last August. Ohio was even wetter with a 12-inch surplus," she said.

"Soil erosion has occurred with excessive run-off from saturated fields.

"The best remedy for soggy eastern Midwest farms would be little or no precipitation ahead of corn planting in late April-early May," but the "forecast this week is very wet".

'Short squeeze'

Furthermore, academics at Fapri, a much-respected cross-university grouping, came in with lower forecasts for US corn stocks in 2012-13 than farm officials have stated, with differences in ideas on sowings and use in making ethanol largely behind differences.

And some commentators detected potentially a technical boost to prices too.

Darrell Holaday at Country Futures said: "Clearly there is a short squeeze in the March corn," meaning holders of short positions in the expiring contract are finding it hard to find the grain to cover their position, and are being forced to pay up to get out.

"This is dominating the grain markets."

Certainly, the March contract closed 1.1% higher at $6.66 ¼ a bushel, with the May lot adding 0.9% to $6.60 ¾ a bushel.

Wheat eases

But if there was any domination, with pressure from external markets.

Indeed, the default move for commodities was down, after China forecast its economic growth this year at 7.5%, the first sub-8% figure since 2004.

The CRB commodities index ended 0.5% lower.

And

wheat

didn't put up much resistance, bar data for US wheat exports, as measured by cargo inspections, which came in at 16.9m bushels, well up from the 10.2m bushels a week before, and a number termed "solid" by Mr Haladay.

Chicago wheat for May ended 0.4% lower at $6.72 a bushel.

Weak downgrades

Even soybeans, the darlings of Chicago of late, found themselves out of favour.

Sure, on the bullish side, the day brought some more downgrades to the Brazil's drought-hit soybean crop but, at 69.8m tonnes from consultancy Celeres and 69.5m tonnes from crushing industry group Abiove, they were well above some estimates of 68m tonnes which boosted the oilseed last week.

But the news from China was ill-received, with the country the top soybean buyer.

"The influence of the news out of China has impacted the soybean complex as it has been weaker most of the day," Mr Holaday said.

Data ahead

Besides, as US Commodities said, "farmer selling is picking up in South America" for the oilseed.

And there is the risk that the soybean data which really count, in the US Department of Agriculture's next monthly Wasde report out on Friday, may not live up, or down, to expectations.

Mr Holaday took issue with the last estimate for US soybean exports in 2011-12, saying it was "difficult to justify" given export data for the season so far showing up 25% lower than a year ago.

"USDA's current projection is 15% below the year ago level of 1.5bn bushels a year ago," he said.

Soybeans for May ended down 0.6% at $13.25 a bushel.

Sugar sours

The weakness was reflected in soft commodities too, bar cotton, with New York

cocoa

for May shedding 2.2% to $2,283 a tonne, while arabica

coffee

for May ended down 0.1% at 201.70 cents a pound.

And raw

sugar

for May dropped 1.1% to 24.68 cents a pound, sapped by alift by Czarnikow to its forecast for the world production surplus in 2011-12, and a statement from India's farm minister of potentially a further 1m tonnes of sugar exports in the offing, above 2m tonnes already cleared.

Furthermore, cane industry group Unica signalled that Brazil's Centre South region, the main sugar producing area of the top producing country, would achieve cane output of 518m tonnes this year, and 34m tonnes of sugar.

"This is at the upper end of most recent forecasts," Nick Penney at Sucden Financial said.

Nor did a huge rise in speculative interest in the sweetener help, as revealed in weekly US regulatory data, signalling potentially a reduced appetite ahead for more.

By Agrimoney.com

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