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Evening markets: US exports condemn grains, but bless cotton

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Just when investors were coming round to the idea that latest US corn estimates were bullish, and fears for the eurozone fell a notch, along came dismal export numbers to floor grain futures.

Early headway in Chicago grains was readily crushed after the US Department of Agriculture revealed that export sales of a meagre 298,000 tonnes of

wheat

in the latest week, 251,000 tonnes of

corn

– well below market expectations on both scores.

"How bad were the corn export sales? They were worse than a very poor wheat number," Darrell Holaday at Country Futures said.

And the wheat number was the worst since January, old and new crop combined.

"Both numbers were definitely negative. Not good numbers for a market needing bullish number."

'On the verge of collapsing'

The

soybean

figure was better, at 606,000 tonnes, and larger than most investors expected.

Even so, it was nothing for bulls to get too excited about.

"Remember that we are 34% behind last year's pace so we have plenty of work to do to catch up," GrainAnalyst trader Matthew Pierce said.

University of Illinois agricultural economist Darrel Good said that the "larger sales are encouraging, but unless they are sustained soybean prices may remain under pressure".

Indeed, Benson Quinn Commodities went a bit apocalyptic about the oilseed whatever, saying "soybeans remain on the verge of collapsing as potential support levels fail, and the complex lacks the supportive story required to trigger buying".

Goldman downgrade

Goldman Sachs, a long-time supporter of soybeans, hardly helped by lowering its price forecast for soybeans, citing the improved outlook for South American crops.

"We still expect that soybean prices will outperform corn prices over the next 12 months. However, improving weather conditions in South America will likely defer this move into the 2012-13 crop year and limit its magnitude."

Nor did official data showing a 7.7% month-on-month fall in soybean imports by China, the top buyer of the oilseed, in October to their lowest since March.

Soybeans for November dropped 1.5% to $11.67 ½ a bushel for January, with the expiring November contract ending down 1.5% at $11.58 a bushel, within an ace of a one-year closing low for Chicago's spot contract.

Early strength

And grains fared even worse. Corn for December dropped 1.6% to $6.45 ½ a bushel for December delivery, while Chicago wheat for the same month tumbled 3.6% to $6.20 a bushel.

Which was a shame for bulls, since matters had looked to be going their way earlier on.

There is a growing consensus that Wednesday's USDA Wasde crop report was not so negative for corn, despite the higher-than-expected number for stocks at the close of 2011-12, with Mr Pierce, who initially viewed the overall report as "bearish to neutral" saying on Thursday that for corn it was "neutral to bullish".

Goldman Sachs hiked its forecasts for corn futures, pointing out that strong corn prices was a support for wheat too, given that the two grains are interchangeable in many uses.

Greek appointment

And external markets perked up too, helped by the settlement by Greece of its president (former European Central Bank vice-president Lucas Papademos), and a drop in Italian bond yields below 7%.

US weekly jobless claims were better-than expected too, falling 10,000 to 390,000, showing promise for the world's biggest economy, even if Chinese trade data were seen as mixed, and the European Union's economic growth outlook darkened.

The European Commission slashed its forecast for the bloc's growth next year to 0.5% from 1.8%.

Still, Wall Street

stocks

stood 0.8% higher in late deals, with the

dollar

falling 0.3% and the

Vix

volatility index, the so-called "gauge of fear", sliding 8.2% (proving itself volatile) and all adding to a "risk on" picture which might have been expected to favour agricultural commodities.

'Total surprise'

New York

cotton

at least caught the tailwinds, ending up 2.4% at 99.50 cents a pound for December, spurred by some altogether better weekly US export sales data - of more than 1m running bales old crop and new.

The figure included a huge purchase, of 998,000 tonnes, by China, the top importer of the fibre, whose purchasing behaviour is seen as crucial to sentiment.

Not that all observers saw the data as unashamedly bullish.

Veteran trader Mike Stevens, terming the sale a "total surprise", said it "must be taken in context and in my opinion does not represent resting demand but a one-time sale for their reserves.

"In fact if you take out that one big sale, we actually had another negative export week – that is cancellations of about 50,000 bales exceeded sales of about 44,000 bales."

Sugar goes crabwise

But not all soft commodities were quite so positive.

New York raw

sugar

added all of 0.1% to 25.39 cents a pound for March delivery.

"We continue sideways, it seems, in light volume," Thomas Kujawa at Sucden Financial said.

"It's been seven sessions in a row now of pretty much 25.30-ish cents a pound to 25.70-ish.

"There seems little in the way of profound fundamental news, other than what seems a growing trade scepticism of how much sugar will actually be coming out of India in exports."

'Increased flow of main crop'

And

cocoa

set two year lows in New and London, despite awarning from chocolate giant Barry Callebaut of a supply squeeze ahead, as investors focused on improved short-term hopes.

Barclays Capital flagged pressure on the bean from "increased flow of main crop cocoa out of West Africa", the top producing region.

Cocoa for December ended down 2.0% at $1,583 a tonne in London, having set a low of $1,580 a tonne, and by 2.6% at $2,504 in New York, above a low of $2,500 a tonne.

By Agrimoney.com

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