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Evening markets: cocoa beans jump. Coffee beans tumble

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Would Zhou Xiaochuan, governor of the People's Bank of China, had more impact on Valentine's Day reaffirming his love for the euro?

Whatever, the central bank chief's overtures, while supporting markets early on, had been discounted by the close, as investors focused instead on delays to a E130bn European Union-IMF support package for Greece, and ideas that not all politicians in Athens were as committed as they might be to promises of austerity.

The risk-on feel evaporated, leaving Wall Street

shares

lower and seeing the safe haven of the

dollar

rebound into positive territory.

The

Vix

"gauge of fear" volatility index rose again too, by more than 9%.

'Hot and dry weather'

Some commodities managed to secure their early gains, including Brent

crude

, which was 1.4% higher in late deals, verging on $119 a barrel, amid growing concerns over the threat that an upset Iran poses to oil supplies.

A few crops, especially in the soft commodities space, managed to hold on to their appeal too.

Cocoa

undertook one of its periodic jumps, ending up 5.4% at $2,392 a tonne in New York for March delivery – drawing just ahead of the better-traded May lot, which ended up 5.3% at $2,391 a tonne.

Sudakshina Unnikrishnan at Barclays Capital flagged "concerns over the continuing hot and dry weather in West Africa", cutting further hopes of a crop which a few months ago had been expected to prove sufficient to and the world a second successive season of production surplus.

Furthermore, talks stalled between merchants and the Ivory Coast government over reforms which could bring a huge wodge of cocoa to the market.

Supply issues are especially sensitive to the March contract, which entered the expiry process, meaning it can be physically delivered against – but without many signs of offers in sight.

'Some crop stress'

In Chicago, March

soybeans

rebounded from early losses to end 0.5% higher at $12.61 a bushel for March delivery, the highest finish for a spot contract since October.

The oilseed continues to gain support from South American weather.

While dry areas of Argentina are seeing much needed rain, with WxRisk.com forecasting "rainfall the next seven days will run much above normal across central Argentina", in some other areas a dry pattern is more reluctant to shift.

"Over northern Argentina into Paraguay and south east Brazil into Sao Paulo, amounts will run 25% of normal or less" over the next week, the weather service said.

Benson Quinn Commodities added that "only limited rainfall is expected in the areas of South America, namely southern Brazil, that continue to experience some crop stress".

Chinese deal?

Will this shift further export demand to US supplies?

The US Department of Agriculture unveiled the latest in a series of sales through its daily reporting system, this time for 116,000 tonnes to China, the biggest importer.

And this when Chinese delegates on a trip to the US are potentially on the verge of making an announcement of purchases of a different league (although potentially already discounted in prices).

"It is believed China has inked a letter of mutual understanding, not actual sales contracts, for 10-11m tonnes of US soybeans for the 2012-13 crop year," broker US Commodities said, noting that such a deal would be similar to one a year ago.

Not that US farmers are currently keen to get rid of stocks, another support to prices, with Benson Quinn noting that "price levels that need to be attained to trigger additional producer sales remain in question".

Corn arbitrage calculator

There was some speculation of China buying

corn

too, especially after the USDA on Monday stoked ideas of the country's demand by doubling long-term import forecasts.

"Chinese corn imported to China is profitable by about $1.80 a bushel not counting the VAT," US Commodities said, noting, however, that price differences mean the country's livestock farmers have "been feeding a lot of

wheat

" instead.

At Australia & New Zealand Bank, Scott Briggs said that the bank's arbitrage calculator "says it still makes sense for private importers to import mid-year US corn making about $6 a tonne [including VAT], something which should not be possible pre-harvest in our view".

Still, "we get the feeling that they will await plantings and early part of the growing season on their own corn harvest before looking to pull the trigger again, if at all", he added.

Furthermore, as an extra depressant to prices, US Commodities reminded of the negative impact on US ethanol producers, with a Nebraska plant closed thanks to poor margins.

More tenders

Corn for March ended down 1.0% at $6.27 a bushel.

And, without that support, wheat faded too, shedding 1.4% to $6.26 a bushel in Chicago for March delivery, despite further demand emerging with a 330,000-tonne Saudi Arabian tender.

Egypt, the top importer, issued another tender too, its second in five days, but after the close of markets.

Paris wheat for March ended 0.9% down at E209.00 a tonne, doing its bit to support the chances for French wheat in winning Egyptian trade, with London's May lot shedding 0.2% to £165.00 a tonne.

'Extremely bearish'

Back in New York,

cotton

managed another positive finish, adding 0.3% to 92.45 cents a pound for March, supported by thoughts of underlying mill demand.

But New York

arabica

coffee

continued it decline, losing 1.9% to close at 200.40 cents a pound for March delivery, the worst close for a spot contract since November 2010.

The better traded May lot, favoured a little by investors rolling from the soon-to-expire March contract, fell 1.8% to 202.55 cents a pound.

As in the last session, "the sharp move lower is viewed as extremely bearish, particularly as arabica futures failed to attract any spillover support from Liffe's robusta market, which climbed and extended its gains", Lynette Tan at Phillip Futures said.

London

robusta

coffee

for March added 1.6% to $2,143 a tonne, and extending its new-found premium over the May contract, which added 1.3% to $1,979 a tonne.

This bean has been helped by a fall of nearly one-half in exports from Vietnam, its top producer, last month, compared with January 2011, thanks to the Tet new year festivities and hoarding by growers hoping for higher prices ahead.

By Agrimoney.com

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