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Evening markets: corn takes lead as dollar weighs

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Corn stood firm, and orange juice rocketed, on what was generally a poor day for food commodities, which struggled against a further strong performance by the dollar.

The greenback hit a six-week high against the yen and pushed the euro back below $1.43 to near a three-month low as sentiment about the US economic revival continued to improve.

Wall Street shares were 1% higher at 19:30 GMT. But the currency moves made life harder for many assets, such as commodities, which are denominated in dollars and become less competitive on export markets as the greenback strengthens.

Indeed, oil stood 1.4% lower, a bad omen for crops, many of which, including corn, are used in making biofuels.

'Big storm'

So how did corn manage to close up 2.25 cents at $4 a bushel on the nose?

Some observers noted the weather, which lashed much of the US over the weekend (indeed, the US Department of Agriculture was unable to put out its weekly crop progress and export inspection data).

That still has some impact on corn, given the 600m-700m bushels still left in the field, to judge by estimates for the delayed crop progress statistics, and indeed, further snow is on the way.

"The big storm set for the second half of this week is still in the plans," Illinois-based broker Allendale said. "Starting on Wednesday, snow will fall in the plains and portions of the western and northern cornbelts. Other areas of the cornbelt will see rains."

Rebalancing question

Others pointed to the prospect of funds snapping up extra contracts during the year-end rebalancing, which in many cases will favour raising positions in the year's poorer performing commodities, eg grains, to get weightings back into line.

"The question remains how much rebalancing will occur," Iowa-based broker US Commodities said.

"JP Morgan reported over the weekend they believe corn will experience about 1.2bn new dollars and about $2bn of natural gas," with crude and copper among the losers.

Yet others urged investors not to get too stressed.

"Plentiful supplies of beans, corn and wheat will offer strong overhead resistance while a look forward at new crop potential is seen supportive to corn and wheat, with beans finding support off record large China demand," broker Benson Quinn Commodities said, forecasting that markets would remain range-bound for a few days.

Export rivalry

Soybeans and wheat, nonetheless, traded more towards the bottom of recent ranges. Indeed soybeans lost 1.1% to close at a one-month low of $10.00 ½ a bushel as investors looked ahead to the prospect of the rival South American harvest starting next month.

"About 500,000 tonnes of soybeans will be harvested in northern Brazil in January," US Commodities said, adding that the country would produce about 4m-5m tonnes in February.

Weekend rain improved the prospects for Argentina's harvest too.

For wheat, Turkey's return to exporting the grain weighed on Chicago prices, Country Futures' Darrell Holaday said.

"

They export a fairly high quality milling quality wheat and sold some this weekend," Mr Holaday said.

"This is certainly a bearish psychological factor."

Wheat for March closed down 1.6% at $5.19 ½ a bushel.

Jumping juice

At least some of the soft commodities did better, notably orange juice, which jumped 5.5 cents to 135.95 cents a pound for New York's January contract, the highest close for a near-term lot since February last year.

The rise was attributed in part to some threat of frost early next week in Florida, the biggest US producing state, which already faces a sharp drop in production.

Coffee ended a touch higher too, as forecasters predicted heavy rains to end the year in key growing districts in Brazil.

It was the recent favourites, cocoa and in particular sugar, which held up the rear.

Profit-taking was blamed for a 2.7% slip to 25.59 cents a pound in New York raw sugar for March, with London whites for March ending down 1.4% at $668.70 a tonne.

By Agrimoney.com

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