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Evening markets: Wasde fears get to grain prices in the end

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Investors' nerve lost out in the end.

It held up pretty well for most of a day which threw a Japanese earthquake at them, besides the rise to eurozone interest rates which, while expected, was seen as marking the beginning of the end of an era, in signalling that ultra-cheap money will not be here for ever.

And it is this cheap money which some (if not Ben Bernanke, the head of America's central bank) see as a factor in the jump in food prices.

"It has been a wild morning with the grains going through a wild swing lower during the aftershock in Japan," but pretty well recovered, Darrell Holladay at Country Futures said half way through Chicago's live trading session.

Weak finish

But, in the end, jitters caught up with agricultural commodities.

While prices managed some kind of recovery after the earthquake, when it, fortunately for all, turned out to be not in the same league as last month's, even corn closed lower in the end.

The "wild" swings ended on a downer, with Chicago

wheat

for May ending down 1.2% at $7.73 ¼ a bushel and

soybeans

off 1.0% at $13.63 ½ a bushel.

May

corn

, which set a record $7.73 ¼ a bushel earlier, ended at $7.59 a bushel, down 0.5% on the day.

Already factored in?

The fears which got them in the end were for the US Department of Agriculture report on Friday, which is expected to cut estimates for America's end-2010-11 corn stocks. But by how much?

The consensus is by some 90m bushels, to 586m bushels. And many traders also noted strong weekly US figures on ethanol production and broiler sets as evidence of demand rationing to keep inventories even this high may not be happening yet.

Still, "I caution that the figure seen on Friday morning has already been traded," Brian Henry at Benson Quinn Commodities said.

And many funds appear to have agreed, selling an estimated 13,000 corn contracts.

'Dismal sales'

And with corn lower, the other major crops thought twice. Especially with some poor weekly export sales data, notably for soybeans, of less than 200,000 tonnes.

"Soybean sales were dismal," Matthew Pierce at PitGuru said, while adding that at least actual exports of 350,000 tonnes to China were "supportive, with their consumption remaining strong in spite of weakening crush margins".

Cotton's

export sales weren't so hot either, with negative sales, ie net cancellations, for 2010-11, a factor which brought the old crop May lot back to earth in New York, where it ended just 0.16 cents higher at 28.22 cents a pound.

On a roll

Among other soft commodities,

coffee

fared better, with funds reported to be getting their buying shoes back on again, amid signs that high prices have yet significantly to turn off demand, as data from the International Coffee Organization showed on Wednesday.

The May lot added 2.9% to 272.80 cents a pound, with London robusta coffee beans closing 1.1% higher at $2,496 a tonne.

Sugar

had a mixed day, with New York's near-term May contract suffering, closing down 0.8% at 26.50 cents a pound, while the July contract gained 1.2%, and the October one 1.6%.

The phenomenon was attributed to investors selling out of the soon-to-expire May lot and buying into further ahead contracts, which were supported by continued talk of Brazilian proposals for a sugar export tax, with a rate of 10% mooted.

By Agrimoney.com

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