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Evening markets: US export, China fears squeeze out ag bulls

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Unlike in the movies, the cavalry didn't appear over the hill in the nick of time after all.

Many agricultural commodity bulls had been hoping for the new month to bring a rush of fresh fund money, and give fresh legs to the more upward trend of the last few days.

But while crops patrolled positive territory, many found it difficult to stay there, as did much of the broader commodities complex, which lost 0.2%, according to the CRB index.

Sure, the news from the eurozone was better, with yields on sovereign debt retreating amid ideas that the international central bank action unveiled on Wednesday was bearing fruit, and that the European Central Bank might have some other tricks up its sleeve.

But bears had disappointing data on US weekly jobless benefit claims on their side, plus the poor reading on China factory activity unveiled early on.

'Worse than tepid'

And those willing lower crop prices had some (more) poor US weekly export sales data on their side too.

If

soybean

export sales, at 490,000 tonnes old crop only, were disappointing, those for

corn

, of 280,000 tonnes, were seen even worse.

"The weakness" in grain markets "is being led by a corn sales export number that continues to disappoint", Darrell Holaday at Country Futures said.

"This put the market on the defensive from the beginning. There is still a lot of talk about additional interest from Mexico, which has developed, but there has been very little other activity.

"There is certainly nothing wrong with domestic consumption levels, but exports are worse than tepid."

Chicago corn for March closed down 1.1% at $6.01 ½ a bushel.

China whispers

Soybeans did better, with gloom at the export sales number offset by talk that Chinese buyers were back in town.

"There is talk that China bought a couple cargoes of US soybeans as well as Brazilian for January," Benson Quinn Commodities said.

And the contrary reports over South American weather continued, with the likes of Paul Georgy at Allendale terming it "near ideal", but Benson Quinn warning that "forecasts have taken on a drier tone over the next two weeks with light rains expected as moisture needs for the crops increases".

Soybeans for January dropped 0.3% to $11.28 a bushel.

Export trade

It was down to

wheat

to keep bulls' hopes alive, which it did by the narrowest of margins in Chicago, ending up 0.25 cents at $6.14 ¼ a bushel for March – rebuilding its premium over corn.

But here, the fundamental news was more bullish, with US weekly exports, at 503,000 tonnes old crop, beating many forecasts.

Taiwan tendered for 82,750 tonnes of US wheat too.

And in broader signs of demand, European Union shipments were firm, at 352,000 tonnes for the week, as measured by export licences, while Saudi Arabia's tender for 330,000 tonnes of hard wheat, for delivery in March and April, is still ongoing.

'Competitive southern hemisphere grain'

OK, there are some downsides hanging around, with FCStone's Dublin office noting that "Black Sea area wheat would be expected to compete very strongly for position" in the Saudi tender.

And in case anybody wanted reminding of Argentina's competitiveness, the country's

barley

is believed to have won a 150,000-tonne order from Algeria, for January shipment.

"This shows how competitive southern hemisphere grain is going forward and not the only threat to EU exports is from the east," UK grain traders at a major commodities house said.

Still, interestingly, with Australia's crop increasingly threatened by rain with downgrades, thequality factor that Agrimoney.com highlighted on Wednesday came into play.

Kansas hard red winter wheat for March added 1.2% to $6.69 a bushel, with Minneapolis hard red spring wheat for the same month ending up 1.1% at $8.32 ¼ a bushel.

In Paris, milling wheat notched up a small gain, of E1.00, in the front January contract, which closed at E179.25 a tonne.

'Aware of fund shorts'

Among soft commodities, New York raw

sugar

drifted, ending down 0.4% at 23.59 cents a pound for March, despite some bullish talk around.

"Chat around the trade this morning seems to be of talk of rising prices in domestic markets and notably India it seems," Thomas Kujawa at Sucden Financial said.

(Certainly, Ros Agro results hardly banged the gong for the Russia market.)

And there is the some backchat of the potential for a short-covering rally.

"We are all aware now there are fund shorts in the market, which we haven't seen for a long time, and the trade are conscious of them and looking to trigger stops," Mr Kujawa said.

Sinking beans

But, as ever of late, it was

cocoa

whose headlines made the most bearish reading, with the New York March contract ending down 0.8% at $2,287 a tonne, the lowest for a nearest-but-one contract since March 2009.

London cocoa for March closed down 0.4% at a three-year low of £1,460 a tonne. The bean has been depressed by hopes for firm West African production, at a time when economic worries threaten chocolate consumption.

New York

cotton

kept bullish hopes alive in the soft commodities complex, ending up 0.4% at 91.30 cents a pound for March delivery, after weekly US exports showed demand picking up for destinations other than China.

Weekly exports, for both 2011 and 2012 crops, were 104,000 running bales.

By Agrimoney.com

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