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Evening markets: commodity price revival slips up on Greece

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Markets rediscovered an old habit of slipping on Greece.

Greece was one word which the markets had shelved of late, with the eurozone sovereign debt worry train moving on to Portugal, before appearing to have lost steam.

However, it zoomed back to the top of the financial agenda on Friday, swamping a tentative recovery in commodity markets in its wake.

The worry was a report in a German newspaper, Der Spiegel, that a Greek exit from the euro was being worked on.

While the report was denied in Bonn and Athens, it was enough to reawaken the fears which, after causing markets so much grief among commodity futures already this week, appeared to have taken a rest.

Dollar revives

Wall Street shares lost most of their gains of earlier, after upbeat US jobs data pleased the markets.

And on commodity markets, the blow was two-fold. It came not just from the direct effect of renewed world economic jitters, but from moves on the currency markets.

The euro tumbled. The

dollar

, which had spent much of the day mildly lower against a basket of currencies, soared, up 0.9% in late deals, making dollar-denominated assets, such as key commodities, less competitive.

Oil

, which raw materials investors are looking to for a lead in these turbulent times, turned south, with New York crude down 2.3% in late deals.

The CRB commodities index, whose prominence has gained in line with the sector's turbulence of late, dipped 1.1%, taking its plunge this week to 9.0%.

Battle lost

Agricultural commodities again held up better than many of their non-farmed peers. But the complex sustained casualties, notably

corn

, which lost convincingly its technical battles.

The expiring May lot ended down 3.2% at $6.82 ¾ a bushel, losing its bid to stay above $7 a bushel for a sixth successive week, and extend its record.

The better-traded July lot ended down 3.2% at $6.86 ¼ a bushel, surrendering its 50-day moving average.

If weak technical factors were a reason for chart-watchers to sell, fundamental factors offered reasons too, with Informa Economics lifting by some 130,000 acres to 91.9m acres its forecast for US corn plantings, even after the poor start to the spring sowing season.

Speedy sowings

In fact, a current planting window has lifted hopes of rapid progress in plantings.

"It is possible as of Monday, 60-70% of Iowa and Nebraska will be planted on corn," US Commodities said.

A report from Paragon Economics and Steiner Consulting said: "Recall that 60% of last year's acres were planted in a three-week period beginning in mid-April.

"We should see dramatic gains given this week's dryer, warmer weather."

Estimate cut

That is not the case for US and Canadian spring

wheat

sowings, which still appear to be being hindered by wet weather.

"Temperatures in the northern plains have improved considerably, but wheat planting is really only taking place on high ground and lighter soil," Benson Quinn Commodities said.

The Kansas wheat tour also provided more hope for wheat bulls than farmers, pegging the crop in America's top wheat growing state at 256.7m bushels, below the 270m bushels that the market had expected.

And Informa cut by some 50m bushels, to 1.44bn bushels, its forecast for the US winter wheat crop.

Wheat gained 0.7% to $7.59 ½ a bushel in Chicago and 2.0% to $8.74 a bushel in Kansas City, where hard red winter wheat is traded. Minneapolis spring wheat added 0.9% for July, to close back above $9 a bushel, at $9.03 ¾ a bushel.

In-between beans

Soybeans

were caught in between. It was a help not being corn, which as a magnet for fund money of late, is more prone to falls when speculators sell.

Furthermore, the oilseed has been gaining strength from the unwinding of short soybeans, long corn spreads.

However, the Rosario grains exchange raised its estimate for Argentina's crop by 500,000 tonnes, to 50.2m tonnes, and Informa lifted its estimate of US sowings of the oilseed too.

Soybeans for July gained 0.3% to $13.26 a bushel.

How much lower?

Among soft commodities,

sugar

proved vulnerable to the late sell-off, ending, for July delivery, down 1.9% at of 20.47 cents a pound, a fresh-eight-month low for New York's spot contract.

"We are now at levels where producers are starting to talk about cost of production," Thomas Kujawa at Sucden Financial said. Cost of production is a proxy for a floor to prices, meaning the level at which producers will prefer to stay in bed.

New York

cotton

lost its way too, finishing down 0.9% at 145.56 cents a pound for July, after spending much of the day in positive territory.

But New York

cocoa

recovered some ground, adding 0.9% to $3,082 a tonne for July, amid residual doubts about when top producer Ivory Coast will get exports back on the road after a ban amid its political crisis.

By Agrimoney.com

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