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Evening markets: ags sink after China fears gather pace

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So that soft Chinese economic data did matter after all.

Financial markets' initial sanguine reaction to China's assessment that its economy grew 8.1% in the first quarter, below the 8.4% investors had expected, gave way to something more downbeat.

With separate data showing declining US consumer confidence, investors opted for safety, which meant eschewing Spanish government bonds, whose yields on 10-year notes rose above the psychologically important 6% mark.


dropped 1.0% in London and more than 2% in Frankfurt and Paris, while showing 0.5% losses in late deals on Wall Street.



strengthened 0.4%, an extra headwind for dollar-denominated assets such as many commodities. The CRB commodities index lost 0.9%.

'Not yet seen the lows'

And many agricultural commodity bulls would have settled for losses of that stature.

New York raw


, for instance, plunged 3.5% to 23.37 cents a pound for May delivery, the lowest close for a spot contract for three month, with investors putting well behind them Thursday's downbeat estimate from Unica on cane production in Brazil's Centre South.

"It may be that Brazil figures are becoming a distraction, as production in other countries has increased, stimulated by higher prices, and an overall surplus in second half of 2012 is still expected," Nick Penney at Sucden Financial said.

"We think we have not yet seen the lows," in prices.

After all, separately Czarnikow forecast another strong season ahead for cane production in India, which appears, for now at least, appears to have kicked its wild three-to-five-year output cycle.

'Little chance of a freeze'

In Chicago, wheat fell 2.5% to $6.23 ½ a bushel for May delivery, as weather forecasts appeared to reduce the chance of a further freeze early next week.

Given the advanced development of US wheat, a frost would be seen as an unusually large threat to yields.

"Weather models that seemed to point to little chance of a freeze in the hard red winter areas next week," Darrell Holaday at Country Futures said.

And as for harm from this week's frosts Allendale's Paul Georgy said that while "pictures of crop damage due to frost have hit the internet, we do not believe there has been extensive damage".

'Farmers have changed their minds'

Nor was spring wheat immune, as more stories of a shortage of


seed emerged, but with wheat seen as the beneficiary of a switch of acres, and not just



"Reports out of North Dakota, where corn acres were going to increase, indicate farmers have changed their minds," Mr Georgy said.

"Due to the soil conditions, problems with getting certain varieties of seed corn, problems with fertilizer supplies and early planting possibilities, they are planting more spring wheat."

Minneapolis spring wheat lost 1.5% to close at $8.24 ¼ a bushel.

'Damaged by winterkill'

OK, not all the talk of wheat was price negative, especially in Europe, which took part of a 180,000-tonne order from drought-hit Morocco.

This following a 200,000-tonne purchase by Algeria on Thursday, in which European grain was also believed to have featured strongly.

FCStone noted talk "that 1m hectares of winter crops in Poland were damaged by winterkill continues on the theme of smaller wheat crop for the EU", a topic lent further momentum by official data showing a decline in the condition of French grains crops, year on year.

With the euro weakening too, Paris wheat's decline was limited to 0.4%, to E209.00 a tonne, while London wheat for May actually rose 0.7% to £175.65 a tonne.

'Anchored by large acres'

Back in Chicago, wheat's decline was one reason, besides the broadly weak mood, for the decline in corn futures too.

But investors had other reasons for selling the grain, despite support for the new crop lot from Rabobank.

Mr Georgy said: "Planting progress has been aggressive the last few days throughout the Corn Belt," one reason for removing a bit of risk premium.

Benson Quinn Commodities noted forecast of 0.5-1.5 inches of rain over the weekend in the heart of the Corn Belt, an area which "would benefit greatly from rain, which would result in additional resistance on new crop corn prices".

Rival broker US Commodities added that new crop "December corn is anchored by large acres and a fast planting pace".

'Unusual event'

Indeed it was, with the December contract leading the decline in the corn complex by falling 1.8% to $5.37 a bushel, the contract's second lowest finish of the last year.

(May corn fell 1.3% to $6.29 ¼ a bushel.)

The December lot far underperformed new crop November soybeans, its rival in the battle to attract sowings by US farmers, and which fell a more modest 0.8% to $13.61 ¾ a bushel.

That lifted the soybean: corn ratio back to 2.54:1, favouring the oilseed over the grain in planting decisions.

Soybeans were supported by further upbeat US soybean export news, with a further purchase from China, the third this week reported through the USDA's daily reporting system, and this time for 165,000 tonnes, taking the total to 445,000 tonnes.

"China continues to buy US soybeans as South America harvest continues. This is an unusual event," US Commodities said.

"This indicates the concern China has with the South American crop."

May soybeans closed down a modest 0.3% at $14.36 ¾ a bushel.

Hotter cocoa

The few gainers in the agricultural commodities complex included


, which added 2.9% to £1,452 a tonne in London for May delivery, and soared 4.1% to $2,248 a tonne in New York.

The gains followed data for the European cocoa grind for the first three months of 2012 which, at 353,311 tonnes, was only 400 tonnes lower than the same period a year before, and the third best performance for the quarter on record.

Investors had braced for a worse performance, with figures a year ago seen benefiting from a shift by processors in operations to Europe from strife-hit Ivory Coast.


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