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Evening markets: corn and wheat star as commodities rebound

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Bears were forced into a bout of early hibernation on Wednesday, as upbeat US economic data, and growing hopes for action to avoid a European banks crisis, reminded the likes of agricultural commodities about upward movement.

The US private sector added 91,000 jobs last month, above forecasts of 75,000 posts, a report from payrolls group ADP said, signalling that all is not lost in the world's biggest economy.

A second prop to prices was talk of concerted action among European Union finance ministers to prevent the eurozone sovereign debt crisis poisoning banks, and creating economic and financial mayhem.

Markets resorted to risk-on pose, which meant stronger shares, with London

stocks

soaring 3.2%, Frankfurt shares 4.9%, and New York's Dow Jones Industrial Average standing 1.2% higher in late deals.

As extra good news for commodities, the

dollar

tumbled 0.8% against a basket of currencies, making them more appealing to buyers in other currencies.

'Value for China'

The CRB commodities index added 1.9%, and the main Chicago grains did much better, on ideas that prices had become cheap enough to lure back buyers.

And buyers means, of course, China, whose potential for snapping up large quantities of US

corn

continues to fascinate investors.

"The reality is that corn worked down to levels that prompted value for many players in the corn industry and that is a fundamental reason for the strength," Darrell Holaday at Country Futures said.

"This would include value for China. Although there is no confirmation, there is certainly some buying tied to ideas that China has bought US corn."

Informa estimates

US Commodities noted, after all, that "corn in China is about $2 a bushel lower than US values", which may focus Beijing buyers' attention once the country's National Day holidays end.

Indeed, buyers in the US may have been extra keen to buy now, "fearful that [Chinese importers] will purchase grain when they get back after a week break".

A potential obstacle of Informa Economics estimates passed without too much attention too, with the analysis group downgrading its estimate of the US corn yield by 1.5 bushels per acre to 149.5 bushels per acre, and cut its production forecast by nearly 200m bushels to 12.519bn bushels.

The production estimate was in line with the current US Department of Agriculture estimate, something of a relief to bulls at a time when forecasts are being lifted by better-than-expected field reports.

'On the watch list'

Chicago corn for December ended up 3.0% at $6.05 ½ a bushel, which was a help for rival feed grains such as

wheat

too.

The crops were also joined by concerns over South American dryness, with US Commodities warning that the region's weather "is now on the watch list", albeit with the prospect of rain for Argentina this weekend.

"This will aid heading wheat," US Commodities said.

But perhaps Chicago's wheat's greatest ally were speculators' large net short positions highlighted by latest official data, which would not look so clever if markets indeed found their feet again.

Many shorts were covered, helping Chicago wheat for December add 3.5% to $6.25 ¼ a bushel.

'Upwards of four inches of rain'

The speculative landscape was not so helpful to Kansas hard red winter wheat, and weather better from a farmers' perspective, with the drought-hit US South to receive more rain in time for sowing the grain.

"US weather forecasts are increasingly confident in a rain event this weekend for the southern Plains, with increased precipitation amounts of one-to-two inches likely and upwards of four inches locally," Benson Quinn Commodities said.

(Furthermore, as extra good news for growers, "the rains appear isolated to the southern Plains with little impact expected on harvest activity across the balance of the Midwest".)

Kansas hard red winter wheat for December closed up a more modest 1.9% at $6.99 ¾ a bushel, and rises were also relatively muted across the Atlantic, where a weaker dollar was not such good news, in terms of enhancing US export competitiveness.

Paris wheat for November closed up 1.7% at E185.25 a tonne, with the London November wheat contract adding 1.6% to £148.50 a tonne.

'Harvest pressure'

Still, these recoveries were themselves well ahead of that in Chicago

soybeans

, which added 0.5% to $11.63 ¾ a bushel for November.

Informa was marginally unhelpful in raising its estimate for the US soybean yield by 0.3 points to 41.8 bushels per acre, although this was in line with the current USDA estimate, and at a time when soybean harvest reports have been relatively upbeat too.

But it was the weight of the harvest itself on prices, in raising supplies, that was seen as the biggest factor in the oilseed's muted performance.

"Much of the harvest pressure this week has been moved to soybeans and some basis strength this week in corn in some areas has been noted," Mr Holaday said.

'End user interest'

Soft commodities witnessed more muted revivals too, with raw

sugar

adding 0.5% to 24.80 cent a pound for benchmark March contract in New York.

Sure, "end user interest is evident", Nick Penney at Sucden Financial noted.

But that does not necessarily spell a tight market, with Jurgens Bauer at PitGuru noting that "increased supplies in sugar keep getting legs among traders along with no demand this year from India".

Cotton

for December added 0.4% to 102.30 cents a pound, extending to three days a winning streak helped by ideas of a further downgrade to the US crop.

By Agrimoney.com

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