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Evening markets: crop rally stalls as investors book profits

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Agricultural commodities put in a soft finish to a topsy turvy day, which saw the main Chicago grains trade both sides of even before settling for negative end points.

The trigger point was not, in the end, weekly US export sales data. Indeed, these came in, by consensus, "solid" at 1.15m tonnes of

corn

, old crop and new, and at just short of 800,000 tonnes for

wheat

.

"The lower values last week did buy demand," US Commodities said.

Even

soybean

sales picked up, to nearly 270,000 tonnes, despite a dearth of Chinese interest, which was viewed from both sides.

"The lack of Chinese business in the soybean complex is very evident in recent US export sales reports," Darrell Holaday at Country Futures said.

Benson Quinn Commodities looked at the glass half full: "There were no cancellations from China."

'Halt to sowings'

And the weather picture remained, broadly, supportive.

Sure, forecasts put extra moisture in for Kansas, giving hope for a recovery in one of the world's parched winter wheat areas, and potentially rains at the beginning of June for another area, northern Europe, too.

But "the Ukraine and western Russia stays amazingly dry with large high pressure over them", even this far ahead, WxRisk.com said.

And back in the US, Benson Quinn Commodities noted that the "outlook has a rain events moving across the northern plains and into the Midwest over the weekend with latest forecast slowing movement of this event.

"If current precipitation expectations of one-to-three inches in western North Dakota are realised, planting in this region could come to a halt."

'Overbought'

The trouble was, as US Commodities put it, that "the market is now back overbought", after a rally which earlier on showed Chicago wheat up more than $1 a bushel in three sessions.

And this time softness in other commodity markets showed. Oil stood 1.7% lower in late deals, at $98.43 a barrel, and the CRB commodities index ended the day down 1.4%, with weakness blamed on some poor US housing data, besides the return of Japan to recession.

Many agricultural commodity investors succumbed to the temptation to take profits.

Besides, as Mr Holaday said, much of that news on poor weather prospects "has been built in as the market has moved sharply up this week",

Hard vs soft

Chicago corn ended down 0.1% at $7.49 ¾ a bushel for July, while soybeans scraped to a positive close, up 0.1% at $13.79 ½ a bushel for July.

The new soybean lot fell 0.2% to $13.53 ¼ a bushel. But this was, nonetheless, enough to play a bit of catch up on new crop December corn, which shed 1.7% to $6.72 ¾ a bushel. (Is Societe Generale's short corn/long soybeans trade playing off?)

Chicago (soft red winter) wheat fell 0.6% to $8.17 a bushel but, for once, this did not set a trend, with the problems besetting harder wheats keeping Kansas's July contract 0.7% ahead, at $9.44 ¾ a bushel.

The Minneapolis equivalent finished 1.0% higher at $10.06 ½ a bushel, crossing the $10 line for the first time since February.

European contracts did better too, helped earlier on by weaker currencies besides weather scares, with Paris's November lot closing up 0.8% at E244.00 a tonne. London's November contract added 1.3% to £193.50 a tonne.

Indian outlook

Soft commodities were generally weaker, with

sugar

tumbling 4.5% to 21.82 cents a pound, weakened by prospects for more mighty output ahead in India, the second-ranked producer.

"The director general of the Indian Sugar Mills Association said India's sugarcane plantings and production in 2011-12 may increase by between 7-10%," Sudakshina Unnikrishnan at Barclays Capital said.

"The cane crush could also rise by a similar percentage."

Too optimistic?

New York

coffee

for July fell 2.4% to 263.70 cents a pound for July delivery, as Colombian producers stuck by forecasts of 9.0m-9.5m bag harvest despite the heavy rains which have been soaking the country.

Indeed, Commerzbank analysts were sceptical over the forecast.

"This estimate could prove too optimistic. The heavy rain in the last two months and the resulting landslides have destroyed part of the crop," the bank said.

"The shortage of high-quality coffee beans is likely to persist and arabica prices should stay at a high level."

By Agrimoney.com

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