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Evening markets: China import talk, again, supports grains

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There were plenty of reasons to sell crops on Monday.

But, with those rumours of Chinese

corn

imports hanging around, bulls retained the upper hand in Chicago grains at least.

The default move for commodities was actually lower, after China, a huge buyer of a stack of raw materials, unveiled dismal trade data, showing a $13.5bn trade deficit for February.

The CRB commodities index lost 0.5%, and indeed many agricultural commodities of which Chinese has been a big buyer dropped.

Cotton

(of which China is the top importer, consumer and producer) fell 0.9% to 88.00 cents a pound for May delivery, although the drop might have been worse were it not for the uncertainty surrounding both Chinese stockpiling and India's on-off-on(ish) export ban.

The 88 cents a pound mark has, as veteran trader Mike Stevens said, held "pretty much held like a rock" despite a succession of data indicating higher inventories.

"You cannot get more bearish," he told Agrimnoney.com.

Exports slip

Soybeans

, of which China is also the top buyer, felt the downdraft too, closing a modest 0.2% lower at $13.34 ½ a bushel for May.

Chinese soybean imports actually fell in February by 16.9%, month on month, to 3.83m tonnes, with vegetable oil buy-ins dropping as well, by 11.3%.

And, further tarnishing what has been, of late, a better picture for US soybean exports, weekly shipments, as measured by cargo inspections, came in at 26.2m bushels, well below the previous week's 32.9m bushels.

'Significant amount of moisture'

In fact, US export data for grains were better, at 31.6m bushels for

wheat

, up from 17.4m bushels a week before, and higher than in the same week last season too.

For corn, export inspections were 36.2m bushels, the US Department of Agriculture said, up from 31.1m bushels the previous week.

But these were among the few fundamental data which could be deemed price supportive.

Wheat, for instance, had the mainly bearish factor of rain over the weekend for many too-dry regions of the US South, with more on its way.

"Weather forecasts for the US are a negative for wheat as the models indicate a significant amount of moisture moving into the southern Plains," Darrell Holaday at Country Futures said.oHolada

Risk of 'damaging freeze'

In fact, there were some hope for bulls, the unusually warm weather in the southern Plains, which has encouraged development, is followed by a late frost.

"There is a worry that winter wheat in the southern Plains may be subject to a damaging freeze later this spring, if the weather pattern should suddenly turn cold delivering a hard freeze," Gail Martell at Martell Crop Projections said.

"Wheat development is very advanced from continued warmth, much of the crop now already jointing."

But there was little solace for bulls in upgrade by ProAgra to 42.6m tonnes, from 45.66m tonnes, in its forecast for this year's Ukrainian wheat crop.

'Plant from horizon to horizon'

The consultancy lifted its forecast for Ukraine corn too, by 3.6m tonnes to 21.3m tonnes

And this on top of Friday's upgrade by Informa Economics to 95.5m acres in its forecast for US sowings this year, and its idea of US corn inventories rising to 1.8bn bushels in 2012-13, above the USDA estimate.

"I guess we will literally plant from horizon to horizon. We will also plant in between highways, along drive ways and every other plot of land possible," Matthew Pierce at GrainAnalyst.com said.

China talk, again

However, he added: "It is noted that the trade continues to ignore all bearish information leaning on bullish sentiment and momentum instead of hard facts."

In fact, speculation of Chinese corn imports was, again, seen as largely behind the rise of 2.2% to $6.59 ½ a bushel in Chicago's best-traded May corn contract, which in turn backe a 1.3% rise to $6.51 ¼ a bushel in May wheat.

The close-to-expiring March corn lot closed up 2.7% at $6.71 ½ a bushel - the highest finish for a spot contract since September.

"There is still talk about Chinese purchases of US corn," Mr Holaday said, adding that while there had been "no confirmation of any purchases", rumours were being "fuelled by private forecasts that indicate that last year's corn crop in China is significantly below the official government forecast".

Shanghai-based JC Intelligence is one such forecaster, seeing the harvest at 168m tonnes, well below China's official estimate of nearly 192m tonnes.

Meanwhile, Standard Chartered stoked the concerns by talking of a "tipping point" for Chinese corn imports, while Goldman Sachs chipping in by saying that, with soybeans already have risen so much this year, corn futures offered better prospects for now.

'Vicious day of reckoning'

Not that all are so convinced, such as Mr Pierce, who said that "as I see it, this ship is going to sink, with a vicious day of reckoning on the horizon.

"There are too many in the trade without any knowledge of what is going on. There are too many riding the momentum wave that when dissipated will leave a vacuum under the trade with no one willing to step up and buy it."

Mr Holaday had a slightly different take, saying that the March contract, against which there has been a void of deliveries, was suffering a short squeeze, which will "likely carry the [rally] through the expiration of the March contract on Wednesday".

However, market dynamics would, be "tested when the contract expires".

Mid-crop forecast

Many soft commodities were left more exposed to the more negative macro-economic picture, with New York arabica

coffee

facing a scramble by producers to sell as well, extending the bean's decline.

The May contract ended down 0.7% at 184.85 cents a pound, a 17-month closing low for a nearest-but-one contract.

London robusta coffee followed this time too, tumbling 3.2% to $1,986 a tonne for May delivery.

But

cocoa

found some resilience after exporters said that the 2011-12 mid-crop in Ivory Coast, the top producer, would come in at about 323,000 tonnes, well below last year's 471,735 tonnes, and a below-average crop too.

Cocoa for May ended down 0.6% at £1,548 a tonne in London, and by 1.1% at $2,383 a tonne in New York.

By Agrimoney.com

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