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Evening markets: crop futures end poor year on upbeat note

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Crops ended a broadly negative trading year on an upbeat note, helped by a weaker

dollar

, and, for grains, positive US export data and those South America weather concerns.

A softer dollar, down 0.4% against a basket of currencies, meant the default move for dollar-denominated commodities was upwards, in making them more competitive as exports.

2011 agricultural commodity winners

Feeder cattle, (Chicago): +20.1%

Live cattle, (Chicago): +14.1%

Lean hogs, (Chicago): +5.9%

Corn, (Chicago): +2.8%

Price performance of spot contracts

The greenback was pressed back by a firmer euro, which was strengthened by a raft of austerity measures unveiled by Spain, seen as one of the eurozone nations more at risk from its debt burden.

Spain's new government unveiled plans including rising in income and property taxes and a freeze on civil servants' wages to improve its finances.

Losses curtailed

That bolstered general market confidence too, helping Frankfurt stocks close Friday up 0.9%, and Paris shares up 1.0%, with London equities showing a marginal gain, although New York stocks traded lower in late deals.

... and 2011's worst agricultural commodity performers

Cotton, (New York): -37%

Rubber, (Tokyo): -37%

Cocoa, (London): -32%

Cocoa, (New York): -31%

Raw sugar, (New York): -27%

Price performance of spot contracts, expect rubber, where sixth lot is used

coffee for March added 1.2% to 226.85 cents a pound for March, limiting it losses in 2011, on a spot contract basis, to 5.7%.

Even

cocoa

, hard hit by better West African production prospects, put on a brave face, adding 1.3% to $2,109 a tonne in New York for March delivery – putting a stop on its losses for the year at 31%.

Raw

sugar

couldn't quite see the positive side, but at least rebounded from early lows to close down 0.9% at 23.30 cent a pound, taking its 2011 decline to 27%.

Rebalancing act

It should be mentioned that there is a complicating factor too mitigating in favour of this year's poorest performers, in the fund reweighting process next month which sees index funds rebalance portfolios back to mandated weightings.

The wheat league

Minneapolis: -7.2%

Kansas: -16.5%

Chicago: -17.8%

Paris: -19.8%

London: -24%

Price performance of spot contracts

In theory it should mean selling of better performers too, such as

corn

, which has achieved a small gain in 2011.

"The funds' rebalancing will be watched closely next week," Paul Georgy at broker Allendale said, noting talk that the purchases of more than 21,000 wheat contracts and sale of more than 21,000 corn contracts was in the offing.

"We would not expect them to sell the 21,000 corn contracts or buy the 21,000 wheat contracts all at one time," he added.

'Hot and dry weather will return'

Indeed, the prospect of reweightings did not stop corn putting in a firm performance, adding 1.5% to $6.47 ¼ a bushel, taking its gains for the year nearly to 3%.

Other soft commodities

Orange juice (New York): -1.9%

Coffee (New York): -5.7%

Coffee (London): -15.2%

White sugar, (London): -23%

Price performance of spot contracts

Some weather models on Friday turned down the prospect of rain for drought-struck Argentina.

"There were some showers across north central Argentina overnight but hot and dry weather will return over the weekend," broker Benson Quinn Commodities said of the outlook.

Martell Crop Projections put it so, that "central and eastern areas of Rio Grande do Sul and Parana in south Brazil may receive over 1 inch of rainfall" over the next week, which may sound a lot by US Corn Belt standards, "however, with hotter temperatures in South Brazil, the climate is wetter".

"Normally, Parana receives 1.50-1.65 inches of rainfall weekly in the summer growing season. Rio Grande do Sul gets 1.25 inches weekly," Martell said, adding that "the projected rainfall for the upcoming week is less than normal, and not sufficient to stem the tide of deterioration in crops".

'Another round of serious heat'

In Argentina, "the forecast is very dry in the next seven days in the main corn and soybean provinces Buenos Aires, Cordoba and Santa Fe. Less than 0.25 inches of rainfall is anticipated in the upcoming week", Martell said.

Oilseeds

Palm oil (Kuala Lumpur): -16.2%

Soybeans (Chicago): -14.0%

Soymeal (Chicago): -16.4%

Soyoil (Chicago): -9.8%

Price performance of spot contract for soybeans, and third contract for palm oil

"There may be some rain over central Argentina, but even if there is it does not look like a big deal," WxRisk.com said.

The week from January 12 looks more promising in terms of rain, if with "another round of serious heat".

"The [weather] model strongly implies another round of temperatures with maximum readings above 40 degrees Celsius over Cordoba and Santa Fe."

Strong sales

"We remain in a South American weather market," broker US Commodities said, estimating that about one-half of Argentina and Brazilian corn was pollinating.

Still, soybeans were helped too, ending 2011 down 14.0%, but adding 0.9% on the day to end at $11.98 ½ a bushel for January delivery.

The better traded March contract gained 0.9% to $12.07 ¾ a bushel.

As an extra bonus, US weekly export sales of soybeans hit 663,000 tonnes, beating the 300,000-600,000 tonnes expected by analysts, and giving evidence to ideas of US trade benefiting from South America's woes.

Export dynamics

US weekly export sales of

wheat

beat forecasts too, coming in a 431,000 tonnes, above the 200,000-400,000 tonnes the market had expected.

That helped Chicago's March contract add 1.2% to end at $6.52 ¾ a bushel, albeit still meaning a loss of nearly 18% for 2011.

Of late, "wheat has found support with feed wheat buying on the South American dryness", US Commodities said.

As an extra plus point for wheat, UkrAgroConsult, the analysis group, slashed its expectations for Ukraine exports of the grain in 2011-12 by 2.1m tonnes to 7.6m tonnes, albeit a figure above that some other observers have come up with.

Ukraine wheat exports got off to a dismal start to 2011-12, held back by export taxes, while more lately drought, and the prospect of a poor 2012 harvest, has encouraged farmers to withhold supplies in the expectation of firm prices next year.

European wheat

Paris wheat took some succour too, if with gains limited by the firmer euro. Best-traded Paris wheat for March added 0.5% to E195.25 a tonne.

The January contract eased 0.4% to E202.50 a tonne, taking the decline over 2011 nearly to 20%, on a spot contract basis.

London wheat for January added 0.5% to £152.25 a tonne, meaning 2011 has delivered a 24% loss.

The better traded May lot ended the day up 0.3% at £154.00 a tonne.

By Agrimoney.com

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