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Evening markets: China purchase talk lifts corn from rubble

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Did China buy

corn

? Is it really after 5m tonnes? Is it going to the US, or Argentine, sellers?

China, which early on was taken by many traders as providing a bit of a pressure to prices by unveiling an auction from state reserves, ended up the day a firmly positive stimulus, as such questions echoed round the Chicago trading floor.

"The one glimmer of hope [for prices] is talk coming from China that they are looking to buy world corn following the price break in US markets," GrainAnalyst trader Matthew Pierce said.

"Nothing more specific than talk, but with prices up 5% on the week in China there is evidence that they have a distinct need."

Risk off

It was enough to drag December corn from losses of more than 2% early on in Chicago to close higher – only by 0.25 cents, at $6.92 ¼ a bushel, but higher.

And that was saying something on a weak day for risk assets, as markets continued to react badly to a perceived vacuum in political leadership (another one) at the weekend when a meeting of eurozone finance ministers ended without a plan for tackling the bloc's debt woes.

Wall Street

stocks

were down 1.6% in late deals, European markets closed down by 2-3%, and the safe haven of the dollar added 0.7% against a basket of currencies.

That put extra pressure on dollar-denominated exports, making them less affordable. Brent

crude

dropped 2.8% lower back below $110 a barrel, while

copper

dived to a nine-month low of $8,323 a tonne in London at one point. Indeed, the CRB commodities index dropped 1.8%.

'Risk premium removed'

Corn had the extra downer of the US harvest, bringing certainty besides a spike in supplies for the harvest.

"The market continues to take risk premium out of the market as harvest is picking up in the South," US Commodities said.

Besides, harvest talk suggests "better-than-expected" yields too Darrel Good, at the University of Illinois, said.

"These results suggest that the US Department of Agriculture may not reduce the 2011 yield forecast below the current forecast of 148.1 bushels per acre, or perhaps could even increase the forecast in October or November."

Since 1975, after all, the USDA has in seven years in an October revised up yield estimates, out of the 18 years in which it cut forecasts the month before.

Until the China rumours flew, this cocktail looked more than a match for the fears for Argentina dryness, and damage from the US frost last week, which had looked bull's best cards.

"There is definitely some buying tied to concerns about the freeze damage in parts of northern Iowa and southern Minnesota," Darrell Holaday at Country Futures said.

Rain questions

This time,

wheat

didn't benefit from corn's move, allowing its discount to expand again, with Chicago's December lot closing down 2.2% at $6.73 a bushel.

Sure, weekend rains in the US South disappointed some farmers hoping for better to improve hard red winter wheat sowing conditions.

"There was a significant area that received good moisture but there was also a large area that got little to none," Mr Holaday said.

US Commodities noted that "Australia and the Ukraine are also dry in their hard red winter wheat areas".

North African orders

Furthermore, there was evidence of demand, with US weekly export inspections jumping to 33.3m bushels, double those the previous week.

Still, with ample world supplies, the grain put up little resistance against further selling.

That dragged on Paris wheat too, offsetting some of the benefits of a weaker euro and, rumoured, victory for French wheat in an Algerian tender for 450,000 tonnes.

Some believe that 92,000 tonnes of soft milling wheat bought by Tunisia were also of French origin.

Paris's November lot closed down 0.8% at E195.50 a tonne, while London's November contract shed 1.7% to £159.00 a tonne.

'Talking your position'

Soybeans

closed 1.4% lower at $13.36 a bushel in Chicago, for November delivery, undermined by pressure from the early harvest offset by a forecast of healthy Chinese imports of the oilseed too.

The American Soybean Association predicted a 5% rise in China's soybean purchases next year. "Nothing like talking your position," GrainAnalyst's Matthew Pierce said.

But

cotton

had no such help, weighed down by its status as a non-food farm commodities for which demand is seen most linked to the world economy.

As Luke Mathews at Commonwealth Bank of Australia said earlier on, "further demand destruction remains a distinct possibility given current cotton prices are exceptionally high and the global economic outlook is very weak".

New York's December contract fell the 5.0-cent exchange limit to close at 105.52 cents a pound.

Some beans bounce…

Elsewhere among softs,

cocoa

also had a poor day, closing down 2.7% at $2,716 a tonne for December delivery, the weakest finish for nearly a year.

"Cocoa values have fallen over 300 points in the past two weeks and while a bounce may be in order, there is no fundamental reason to suggest demand will outstrip supply anytime soon," Jurgens Bauer at PitGuru said.

"Since estimates remain high and in surplus, the down trend should remain intact in cocoa. I will look to sell rallies."

However, New York

coffee

overcame early weakness to close 0.6% higher at 262.05 cents for December delivery, despite technical factors deemed negative by some.

"Coffee is in a full-on nose-dive, offering a nearly perfect v-shaped market reversal," James Mound at the Mound Report said.

By Agrimoney.com

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