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Evening markets: crop downgrade ideas keep oilseeds bubbling

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Will the buying in oilseeds never stop?

It is tricky for bears when estimates for South American crops just keep getting lower.

Following downgrades for the Brazilian

soybean

harvest by the likes of Agroconsult and Informa Economics, the US Department of Agriculture's attaché in Brasilia chipped in by pegging the crop at 66.0m tonnes, 2.5m tonnes below the official USDA figure.

"Sure, he also forecast a 1m-acre rise in sowings next year, but that's a long way off yet," Jerry Gidel at Illinois-based broker Rice Dairy said.

Wasde ahead

What is catching investors' eyes more on the immediate horizon is the prospect of the USDA's monthly Wasde crop report on Tuesday.

"Of course, that will include new soybean production estimates for Brazil and Argentina. That is driving the market higher in anticipation of significantly lower estimates," Darrell Holaday at Country Futures said.

Nor is it as if demand is showing too many signs of tiring.

Weekly US soybean exports topped 1.1m tonnes, old crop and new combined, ahead of forecasts of at best 1.0m tonnes, USDA data showed.

Both sales of corn, which also topped 1.1m tonnes, and soybeans "reiterate the need for rationing with tightening global balance sheets", Benson Quinn Commodities said.

'Fears over production prospects'

Chicago soybeans closed up 1.0% at $14.34 a bushel for May, a seven-month closing high for a spot contract.

And it was not the only oilseed in demand, with Paris

rapeseed

closing above the E500-a-tonne mark for the first time since January last year, on a spot contract basis.

The May lot close up 0.8% at E504.00 a tonne, supported, as UK farm -operative Openfield, noted "not just by spillover support from soybeans but fears over production prospects in Europe as a result of the harsh winter and below average rainfall in February and March".

Offre & Demande Agricole, the French consultancy, cut by 1m tonnes to 19m tonnes its estimate for the European Union rapeseed crop, forecasting import demand rising to 3.5m tonnes in 2012-13, from 3.2m tonnes this season.

Still, a large European commodities house advised caution, saying "traders are keeping a close eye on Canada where drilling conditions are ideal and local prices conducive to a massive rapeseed acreage".

How many extra soybean acres?

Oilseeds' Achilles heel was in the new crop November contract, which gained, but by a modest 0.4% to $13.81 ½ a bushel, well behind old crop lots.

It was behind new crop December

corn

too, the main alternative in farmers' spring sowings, which gained 1.1% to $5.50 ¼ a bushel, pulling back the much-watched soybean: corn ratio to 2.51.

The dynamic was attributed in part to the unwinding of "short corn, long soybean" spreads ahead of a holiday weekend, which denies investors the chance to trade on Friday.

However, there is some feeling that the surprisingly weak estimate for US soybean sowings of 73.9m acres may prove a low water mark, meaning futures do not need to price in so much more of an incentive for farmers to choose the oilseed.

"The main question now is how many more acres in the US will be drilled with soybeans in the light of the higher prices," the European commodities house said.

"There is some evidence that more acres from the Conservation Reserve Program are being ploughed up and planted with soya."

'More like normal'

Furthermore, there is some idea that the weather which has speeded early harvest is to turn back towards seasonal norms, as a cold front hits early next week, presenting some threat to corn sowings, besides winter wheat crops.

"Weather forecasts are pointing to a little further south move with cold temperatures next week in the Ohio Valley and that has been supportive to all of the grains," Mr Holaday said.

Rice Dairy's Jerry Gidel told Agrimoney.com: "There was this attitude that we will get all the corn planting done by May 1, soybeans will be in by the middle of May and we will be coasting.

"But now the feeling is that the second half of April will be more like normal."

'A negative number'

Old crop corn was a little slower, adding 0.2% to $6.52 ¼ a bushel for May besides the strong weekly export figure, as investors proved reluctant to add in further long positions

It also felt a tug downward from May wheat, which ended down 0.1% at $6.38 ½ a bushel, despite a US export boost to this grain too in Egypt buying 115,000 tonnes, plus a further 138,900-tonne sale as revealed through the USDA's daily reporting system.

Still, FCStone noted that "the market is digesting the good rains in the US and Europe and Informa production numbers", which on Wednesday pegged the US winter wheat crop at 1.63bn bushels, a rise of 137m bushels.

"This is a negative number," US Commodities said, if counterbalanced on a global basis by Informa's estimate of world production falling 17m tonnes, including a 9m-tonne drop in Ukraine.

European wheat contracts fared better, with a weaker euro also helping Paris wheat for May close up 1.0% at E211.25 a tonne. London wheat for May added 1.3% to £171.75 a tonne.

Poor export data

Among soft commodities, New York raw

sugar

also rose, by 0.7% to 24.53 cents a pound for May delivery, helped by doubts emerging about Indian exports.

"News from India we read with interest seems to suggest the possibility of exports from there is, to some extent, restricted/ constrained by the government's procedures and export systems," Thomas Kujawa at Sucden Financial said.

But New York

cotton

for May dipped 0.9% to 88.54 cents a pound, as America's strong run of export sales came to an abrupt end.

I would personally be quite pleased with a net 50,000-75,000 running bales in sales," even if less than half the 157,000 running bales the week before, Mike Stevens, the Louisiana-based cotton expert, said.

He didn't even get that, with cancellations meaning sales came in at a negative 47,000 running bales.

By Agrimoney.com

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