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Evening markets: US budget deadlock sends crops tumbling

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There's one Thanksgiving present that the whole financial world wants.

And that is a resolution by America's so-called super-committee set up to cut the country's budget deficit by $1.2 trillion.

That looked increasingly unlikely as the committee neared a deadline of thing evening to come up with a deal in time for a vote on Wednesday.

The deadlock spawned a memorable wisecrack from Australia & New Zealand Bank agricultural commodities director Scott Briggs.

"Maybe the US needs a 'super-duper' committee? Because the plain old 'super' committee doesn't look to be cutting the mustard," Mr Briggs said.

But that was about it for upside. Financial markets declined to see the funny side.

'Another leg down'

Wall Street

shares

stood 2% lower in late deals, following a collapse of 2.6% in London stocks, and losses of more than 3% in Frankfurt and Paris.

The so-called safe haven of the

dollar

added 0.3%, to its highest since early October against a basket of currencies, creating a further headwind for dollar-denominated assets by making them less competitive as exports.

And as an extra downer, the "shortfall" in customer funds at MF Global, the bankrupt broker, may be $1.2bn, nearly twice the $633m that had been announced.

The result was that, as Darrell Holaday at Country Futures said, "the grains took another leg down on the opening today".

"There is really no specific grain news that is leading to the long liquidation. The liquidation is tied to the extreme sell-off in the outside markets."

'Hard to rally significantly'

Not that fundamentals were too helpful either.

Rains over the weekend in Argentina were seen as improving prospects for

soybean

and

corn

crops, after forecasts of a dry spell had raised fears that a La Nina-inspired drought was on its way.

"South American weather continues to be non-threatening and until a weather concerns becomes more prevalent, it will be hard for grains to rally significantly," US Commodities said.

US weekly export data, as measured by cargo inspections, were hardly great, at 40.8m bushels for soybeans, down more than 13m bushels week on week, and 11.6m bushels for

wheat

, down more than 3m tonnes.

Corn's, at 37.6m bushels, at least managed a small week on week improvement.

'Keep the grain bulls at bay'

And yet another Egyptian wheat tender went by, at the weekend, without an offer of US wheat, a reluctance deemed a sign of uncompetitiveness in international markets – at a time when even price leaders in the Black Sea are feeling the heat.

Chinese import data were mixed, showing a good corn figure, but not so hot on soybeans, of which the country is the top buyer.

"China October soybean imports were up 2% year-on-year with Brazil securing the majority of the business, at 2.0m tonnes, while US total was a paltry 500,000 tonnes," Benson Quinn Commodities said.

US Commodities added: "The increased world competition from the Black Sea feed wheat, increased South American corn and soybean production, Australian wheat, and Ukrainian corn are all helping to keep the grain bulls at bay and looking for more fundamental news."

Ukraine seedings

In fact, Ukraine's corn prospects are looking strong for 2012 too, after a record harvest this year, with the poor start to autumn sowings likely to prompt massive reseeding come spring with the likes of corn and soybeans.

The country will sow an extra 2.0m hectares with spring grains and 300,000 hectares with soybeans next year, official estimates showed.

The 2.0m hectares included 500,000 hectares of corn, besides 1.2m hectares of spring barley.

And prospects for Australia's grains harvest have picked up with dry weather.

Western Australia-based grain handler CBH noted: "From just a few days of dry weather across most parts of Western Australia, the amount of grain in the bins has more than doubled in a week."

China to buy?

The impact on wheat was to send Chicago's December contract down 1.1% to $5.91 ½ a bushel.

(The Kansas hard red winter equivalent shed a modest 0.2% to $6.67 a bushel, supported by forecasts signalling continuing drought in parts of the US southern Plains – hard red winter wheat country.)

For fellow grain corn, the December contract lost 2.1% to $5.97 ¾ a bushel, if rebounding more than 4 cents from an intraday low amid hopes of buying by China, which has shown a tendency to get its cheque book out at prices below $6 a bushel.

"The market is looking for China to step up and buy more US corn on recent break which could be supportive," Benson Quinn said.

Soybeans for January fell 1.7% to $11.48 a bushel – the lowest finish for a spot contract in more than a year, pressed by the Chinese data and the better prospects for South American crops.

Rare winner

If investors

were hoping for anything more promising among soft commodities, raw

sugar

actually provided it, with a positive close, by 0.5% for March contract to leave it at 24.09 cents a pound.

The rise was supported by talk of buying by Egypt's SIIC, of 100,000 tonnes of Brazilian raw sugar, and by repeated speculation of Malaysian purchases too.

Furthermore, Datagro came in with an estimate for the cane crush in Brazil's key Centre South region next year of 460m-515m tonnes of cane, below the 528m tonnes forecast by the International Sugar Organization last week (for the 2012-13 season).

'Little ability to rally'

But other soft commodities were not so lucky.

New York

cocoa

closed down 1.8% at $2,414 a tonne, for March delivery, after earlier hitting a two-year low, for a second-in contract, of $2,403 a tonne, with ideas of a bumper West African crop continuing to weigh.

In

cotton

, the technical fears created by its close to the last session at the bottom/below its recent trading range were indeed realised on Monday, when New York's December lot plunged a further 4.0 cents – the daily limit – to a one-year low of 90.81 cents a pound.

"Even with China buying, mill demand in the world is expected to remain poor, so prices ought to reflect that with little ability to rally," softs trader Jurgens Baeur said.

By Agrimoney.com

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