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Evening markets: May Day delivery news presses soy and sugar

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Investors received some May 1 deliveries which were, for bulls at least, not good news.

In New York, the Ice exchange revealed a total of 13,440 lots, or more than 680,000 tonnes, in deliveries against its May raw

sugar

contract, which expired on Monday.

All was of Brazilian origin, with Louis Dreyfus (which on Tuesday unveiled the purchase of US based refiner Imperial Sugar).

"The delivery last night was slightly larger than many expected," Thomas Kujawa at Sucden Financial said, adding that investors had "perhaps construed the delivery as bearish".

Large deliveries are typically taken as a sign that futures prices are relatively high, in representing a more appealing place to sell than cash markets.

Raw sugar for July fell 0.7% to 20.95 cents a pound in New York, the lowest close for a spot contract in very nearly a year.

'Negative psychology'

In Chicago, where May contracts are also expiring, there were a handful extra deliveries against the soy complex, on top of the previous

Against

soybeans

themselves, 757 contracts have been delivered, plus 2,500 contracts of

soyoil

(besides 111

oats

lots and 48

wheat

contracts).

The "fairly heavy" soybean deliveries "did cast a negative psychology on a market that really felt that the soybean supplies were very tight around the delivery points", Darrell Holaday at Country Futures said.

Certainly, soybeans for May stood down 0.5% at $14.96 ¼ a bushel in late deals, with the old crop July lot down 0.3% at $15.01 ½ a bushel.

'A new export record'

But new crop was a different story, the US announcing further sales of 2012-13 supplies to China, this time of 110,000 tonnes.

And Oil World forecast more shipments to come.

"Chinese buyers will increasingly shift to US-origin in the coming weeks because South American supplies are becoming tighter," the analysis group said, cutting its forecast for end-2011-12 soybean stocks to 5.9m tonnes from last month's estimate of 6.3m tonnes.

The US Department of Agriculture has the figure at 6.8m tonnes.

Oil World added that signs were bullish for next season too, saying that "US exports to China will gain momentum and, most likely, reach a new record in September-to-February 2012-13."

New crop soybeans for November gained 0.6% to $13.89 ¾ a bushel.

'Massive planting number'

In Chicago

corn

, there was divergence between 2011 and 2012 crop contracts too, although this time it was the new crop which lost out,

The December lot stood 0.5% lower at $5.40 ½ a bushel, sapped by the surprisingly high planting pace revealed in USDA data, showing US farmers had 53% of their corn crop in the ground as of Sunday, 10 points (roughly 10m acres) more than investors had expected.

"This is a massive planting number," Mr Holaday said, adding that it had "put the grain markets on the defensive".

Yield upgrade?

Besides indicating less chance of losses to prevent plant, the rapid pace is raising ideas of the yield from the forthcoming harvest, with some expecting an upgrade to the USDA estimate, currently 164 bushels per acre, in the next monthly Wasde crop report, next week.

"In six of the past 14 years where plantings were ahead of average, the USDA raised the yield," Paul Georgy at Allendale said.

"An average increase was 1.3% which would mean this year could be 166.2 bushels per acre."

Rival broker US Commodities said: "The crop report May 10 can now be expected to add 1-2 bushels per acre to the trend yield."

'Should see some good wheat'

The old crop lots, meanwhile, did better, helped by ideas of tight near-term supplies, stoked by a dearth of deliveries against Chicago's expiring May contract.

The May contact added 0.5% to $6.63 ¾ a bushel, with the July contract easing a modest 0.1% to $6.33 ¾ a bushel.

However, on

wheat

, lacking dynamics of tight supplies, declines were more universal, with prices helped little by ideas that the Kansas wheat tour is likely to come up with a high yield number.

Jim Shroyer, a Kansas State University agronomist, told tour scouts that at least "from north central Kansas moving west, you should see some good wheat".

'Ratings continue to improve'

Indeed, ideas over wheat condition were boosted by USDA data out overnight showing that 64% of the crop was in good or excellent condition, a 1 point rise week on week, and way above last year's drought-affected figure.

"The wheat condition ratings continue to improve," Mr Holaday said, adding that the weather outlook was decent too.

"The forecasts for the US wheat areas is very positive and there is also rain and cooler temperatures in the forecast for the Black Sea and Eastern Europe wheat areas. This has led to weakness today."

Chicago wheat for July stood 2.0% down at $6.41 ¾ a bushel, with its Kansas peer shedding 1.2% to $6.53 ¾ a bushel.

By Agrimoney.com

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