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Evening markets: Santa rally in grains holds into late deals

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The Santa rally did what it should, last until Christmas, leaving grain bulls on track to claim a clean sweep this week.

It was a bit of a risk-on day throughout financial market, helped by data showing US orders of durable goods up 3.8% last month, beating economists' expectations, and overcoming some disappointing at US consumer spending data showing a rise of just 0.1%.

Frankfurt and London shares closed up 1.0%, with Wall Street stocks up 0.9% in late deals, while the dollar eased a smidgen.

'On' year

Commodities, as in the last session, were not wholehearted followers, with the CRB index adding 0.2%. Brent

crude

was up 0.1% as of 18:50 GMT.

Indeed, some soft commodities found headway elusive, such as New York

cocoa

, which fell 0.5% to $2,218 a tonne in New York for March delivery, amid continuing talk of steady deliveries to ports from farmers in Ivory Coast and Ghana, the top producing countries.

New York arabica

coffee

fell too, down 0.8% to 221.40 cents a pound for March delivery.

Commerzbank, in forecasts for 2012, said that while arabica beans "should remain above 200 cents a pound", added that "peaks of 300 cents a pound seen in 2011 are likely to be a thing of the past", with this year an "on" year in Brazil's cycle of alternative higher and lower crops.

Adage holds true

But elsewhere, it was advantage bulls. Indeed, it was testament to the truth in that Chicago saying that if "bears have the Thanksgiving dinner, bulls have the Christmas feast".

OK, hardly a mega feast, with soybeans for January up 0.3% at $11.65 ½ a bushel, and corn up 0.5% at $6.20 ¾ a bushel.

But a seventh successive positive close for soybeans, and sixth for corn, would certainly offer bulls enough calories for now.

'Stress to return'

One factor holding back the market was the forecast for South American rain and cool needed to break the dry and hot spell in parts of Argentina and Brazil deemed to have damaged corn, much of which is pollinating, in particular this month.

Just how threatening things are depends on who you listen to.

World Weather, for instance, says the forecast for Argentina "returns crop stress to many areas next week as the nation dries out and warms back up after the rain Wednesday and today and after cooling abates this weekend".

"Crops that failed to get significant rain the past two days will see stress return immediately and will likely encounter lower yield potentials since the ground was already too dry after the rain was missed this week.

"Second week rainfall in Argentina does not seem to be great enough to soak any particular region," the forecaster said, as reported by broker Allendale.

However, on the more bearish side, WxRisk.com highlighted in satellite pictures "heavy clouds and storms over south eastern Brazil including Rio Grande Do Sul, and into Corrientes in far north east Argentina".

Dryness and heat in Rio Grande Do Sul, Brazil's southernmost state, has been a particular concern.

'This is a weather market'

Looking ahead, the weather model for the next five days shows "all of central Argentina is completely dry", although there is "some rain coming" to northern Argentina, including Chaco and Formosa, and southern Brazil, including Rio Grande Do Sul

"Longer term, in the six-to-10 day [timeframe], all of Argentina as well as most of Paraguay and south eastern Brazil remains quite dry."

Whatever, as US Commodities said, "this is a weather market", with all the vagaries it can bring, and a factor encouraging profit-taking into a long weekend.

Financial markets in the US, and many other countries, are closed on Monday.

More snouts to feed

Corn had a bit of extra help from a US Hogs and Pigs report which showed the US herd expanding 1.8% over the last year, to 63.7m head, a little ahead of the 1.1% rise that analysts had expected.

More pigs means more need for feed.

That gave the grain a little extra late impetus to keep up with Chicago

wheat

, which added 0.6% to $6.25 ½ a bushel, helped by talk of continued short-covering, after speculators' net short position returned to near-record levels according to latest regulatory data.

(Fresh data on investors' positions will be released after the market close.)

Nigerian appetite

Wheat was also boosted by US officials reveal a sale of 120,000 tonnes of hard wheat to Nigeria, which has emerged as the biggest importer of hard red winter wheat (as traded in Kansas) in 2011.

The order, at any rate, added further weight to ideas that the US Department of Agriculture was too gloomy in earlier this month downgrading estimates for US wheat exports in 2011-12 – even if Australia's crop looks like being of better quality than had been thought.

Kansas hard red winter wheat itself added 0.9% to $6.78 ¾ a bushel for March delivery.

Earlier, Paris wheat for March closed up 0.1% at E186.25 a tonne, while London's best-traded May lot gained 0.5% to £147.50 a tonne.

Does that mean more gains are in the offing?

"£200 a tonne ex-farm for feed wheat might be a little too much for even Santa to sort out," traders at a major European commodities house said.

By Agrimoney.com

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