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Evening markets: Google helps corn find contract high

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Corn

got the right call at last, with a bit of help from Google.

Chicago's December corn lot set the contract high which had looked on the cards since the US lowered its estimate for the domestic crop last week, but which buyers had been reluctant to pay with the wound from America's downgrade by Standard & Poor's, and other macroeconomic concerns, still raw.

The idea that that damage was healing, for now at least, was promoted by Google's $12.5bn bid for Motorola Mobility, putting the internet giant on course for a battle with Apple in the smartphone market.

New York

shares

were up some 1.7% in late deals, while the

dollar

tumbled 1.0% against a basket of currencies, so boosting the competitiveness of dollar-denominated assets as exports.

Indeed,

crude

added 2.7% to return solidly above $87 a barrel – well over $10 a barrel above last week's low, and another positive signal for crops such as corn used in making biofuels.

'Could be rationing now'

Sure, corn's performance was hardly stratospheric, with plenty of caution around about whether US corn supplies will prove as tight as the US Department of Agriculture indicated last week.

Broker US Commodities said: "The real debate is if this price level is rationing supplies.

"We have never started a marketing year at these price levels. We could be rationing now, with a soft world economy," besides the fact that some observers believe the corn yield may turn out better than the 153.0 bushels per acre that the USDA indicated last week.

Furthermore, US export inspections for corn were, at 27.6m bushels, a little soft, down on the previous week's 35.5m bushels.

Contract high

Still, some weather threats remain, with US Commodities also noting that "the dry areas of central Illinois remain dry", and Benson Quinn Commodities noting "missed rains in parts of the central US" over the weekend and with heat set "to return by end of week".

Funds were estimated to have bought a modest 6,000 corn lots.

But it was enough to send the December lot, which was born in the furnace of the 2008 grain price boom, to a contract high of $7.24 ¼ a bushel.

The contract closed at $7.20 a bushel, its highest close, and up 0.8% on the day.

'Modest problem on our hands'

Soybeans

did better, helped by industry data showing the US crush at 122.9m bushels last month, 4.4m bushels above trade expectations.

"Couple this to the recent surge in demand from China and we have a modest problem on our hands for soybeans," from a supply perspective, Matthew Pierce at PitGuru said.

China, the top soybean buyer, has been ramping up imports again, with domestic supplies said to be running low and efforts to raise hog production to fulfil.

Chicago's November lot added 1.2% to $13.51 ¼ a bushel.

Quality concern

Still, it was

wheat

which, once again, proved the leader in Chicago, rising for a fifth successive session boosted by its own fundamentals as well as spillover support from corn.

Wheat had on its side trimmed hopes for Russian and German crops on the supply side, and a huge 660,000-tonne order on the demand side from Saudi Arabia. (And this time an order which went to Canada, the European Union and the US rather than Russia.)

Meanwhile, weather remains worryingly dry for southern US farmers contemplating planting their 2012 winter wheat crop.

Chicago's September lot closed up 1.4% at $7.12 ½ a bushel, just ahead of Minneapolis spring wheat for September, which added 1.3% to $8.72 ¾ a bushel.

"Spring wheat will actually see a break in rains which could help harvest there with the trade eagerly waiting to see what the quality is, with early-cut wheat in South Dakota missing the mark by a wide margin," Mr Pierce noted.

'Technicals get a chance'

Still, even wheat couldn't keep pace with

cotton

, which put in another storming performance, touching the exchange ceiling at one point, following its limit up close on Friday.

Sure, cotton, as a non-food farm commodity more affected by discretionary spending, tends to move more in line with macroeconomic factors than edible crops.

But that's not all. Keith Brown, at Keith Brown & Co, the Georgia-based brokerage, reminded of the "unbelief" of an upgrade by the USDA last week to its estimate of the US cotton crop, despite the drought in top producing state Texas.

"Let's be real, one would not want to have the government on their team in a game of horseshoes. It wouldn't be close," Mr Brown said.

"At any rate, with fundamentals being questioned", it allows the technical (investors) a chance to do something," which means buying.

Indeed, the spread between the December contract, which closed up 3.5% at 104.04 cents a pound, and the July lot, which added 1.5% to 98.07 cents a pound – a spread Mr Brown has raised as a key indicator of sentiment - widened a touch.

Shorts become longs

New York

coffee

was also firm, adding 2.2% to 245.70 cents a pound for September delivery.

In part this was down to fundamentals, with stocks certified for delivery against the lot edging nearly 1,700 bags lower to less than 1,495,000 bags – among the lowest levels of the 2000s.

Furthermore, there is still some cold weather risk to the crop in Brazil, which is typically seen as at risk (albeit not a huge one) of frost until next month.

With coffee one of the few crops (with Chicago wheat and soyoil) that speculators have short positions in, a bit of short-covering was reported.

By Agrimoney.com

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