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Evening markets: bears reclaim cocoa and soybeans

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Bears got a couple of their claws back into the farm commodities market on Friday, claiming cocoa and soybeans as their own.

The general movement in agricultural commodities markets remained upward, helped by firmer ideas for demand, with ideas over the world economy improving, besides some specific factors.

Sugar

, for instance, had both with Sucden Financial's Nick Penney noting support for prices both from a well-received number earlier in the week for fourth-quarter economic output in China - "expected to be the main importer off the world market of sugar this year" - and the fresh fears for Brazilian supplies.

'Weather risk is returning'

Talk of a wet-delayed late start to the harvest in Brazil's Centre South harvest," the top producing region in the top producing country, "continued to circulate", he said.

"Less availability of sugars against March has prompted a rethink on when the projected statistical surplus will materialise and those short of the market both on structure and on a flat price basis have been forced to take out some insurance and reduce positions."

"Weather risk is returning to the sugar market and traders are getting jumpy."

New York raw sugar for March closed up 1.1% at 24.84 cents a pound, with London white sugar for March adding 0.7% to $645.60 a tonne, an 11th straight day of gains.

Grind data

But

cocoa

was sunk by further concerns over demand, after the National Confectioners Association said that North American cocoa grindings rose only 1.5%, year on year, in the last three months of 2011, well below the growth of 3-5% that investors had expected.

The figure represented a third disappointment on cocoa consumption, after soft data from Western Europe and Malaysia.

Cocoa for March closed down 3.3% at £1,489 a tonne in London, and by 2.6% at $2,259 a tonne in New York.

'Soybean crop could recover'

For Chicago soybeans, the problem behind a 0.8% dip to $11.87 a bushel in prices was more of South American weather, with forecasts appearing to take a more benign hue.

"Overnight weather forecasts hint at potentially heavier rains over the course of the next four days in the drier regions of Argentina," Benson Quinn Commodities said.

Rival broker US Commodities said: "It is the improved weather in South America that is anchoring the market. The dry areas have shrunk."

At Country Futures, Darrell Holaday said: "The damage to

corn

in Argentina has been done, but the soybean crop could recover substantially - possible full recovery.

"This is one reason we are seeing more pressure on soybeans today versus corn."

Cash market

Demand for soybeans, as revealed in weekly US export sales figures, was considered strong, at 991,000 tonnes, above forecasts of at best 750,000 tonnes.

As it was for corn, at 759,000 tonnes, compared with estimates of 650,000-850,000 tonnes, and

wheat

too, at 587,000, above ideas of 350,000-400,000 tonnes.

And, as an extra indication of power in sellers' hands, the US cash market has firmed too, with Decater corn, standing at $0.30 a bushel over March futures, at an 18-year high.

"The lack of producer selling in the US and South America has helped to support the basis," US Commodities said.

Benson Quinn said: "As demand resurfaces, producer sales remain quite light," adding that it faced a "a difficult time believing these markets are going to come under considerable pressure in this scenario".

Head and shoulders bottom

Even technical considerations were looking up for corn, with Powerline Group seeing a potential "head and shoulders bottom formation" in the charts.

A head and shoulders, in which the chart looks much as the name suggests, is viewed as a negative signal.

But the inverse, a drop followed by a recovery before a bigger drop, followed by a revival and a smaller drop, is the opposite.

"If the market holds here about Wednesday's low of $5.92 ¼ a bushel, then we will have a right shoulder making a higher bottom.

"With the over-sold conditions... combined with a resurgence in demand, [this] could lead to a technical buy signal that could rally this market over time back to the trading range highs."

Corn for March closed up 0.9% at $6.11 ½ a bushel, with Informa Economics' slight upgrade to its estimate for US sowings of the grain this spring not seen as a surprise.

'Shipped aggressively'

Higher corn was one support for fellow grain wheat, which added 0.8% in Chicago for March delivery to close at $6.10 ½ a bushel, nearly eradicating its discount against corn.

However, demand for US wheat is being viewed as more promising too.

"US feed wheat is being shipped aggressively into Mexico and Egypt is now buying US wheat," US Commodities said.

"US wheat is at $250 a tonne versus Black Sea wheat and French wheat at $260 a tonne. As you can see we have reached a world value."

It was not so long ago that US was importing feed wheat from the likes of Brazil and the UK.

By Agrimoney.com

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