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Evening markets: crops end sour week on sour note

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If there was any residual buying by index funds late on Friday, it had little effect.

It was another losing day for crop bulls, with Chicago corn reporting its fifth successive negative close, and wheat ending at its lowest for two months.

To blame much on the long weekend, with US markets closed on Monday for Martin Luther King Day, would be to clutch at a straw.

"The problem is that there is simply very little buying interest," Darrell Holaday at Country Futures.

Tuesday's US Department of Agriculture crop reports, which raised estimates for supplies of corn, soybeans and wheat, knocked the stuffing out of any fundamental supply-and-demand reasons for holding grains.

And the fear is that there are technical reasons to sell too.

'Long-side liquidation'

Rabobank highlighted the number of long positions still left in corn and soybeans, and the potential for a "sustained period of long-side liquidation" as investors cut their losses.

Benson Quinn Commodities came up with a similar thesis: "The trade is concerned that the lack of decline in open interest in all three markets this week means the lows are not in yet with longs still hanging on to losing positions."

Added to this are concerns that, with the crop-shortage story confined to barracks for now, the hot money will head over the hills.

"[There] has been a suspicion that some of the more speculative investment funds are now looking elsewhere," Hugh Schryver at Glencore's UK grain arm said.

Ugly contest

And it's difficult to blame them, looking at some of the losses. March corn finished 2.5% lower at one-month low of $3.71 ½ a bushel on Friday, taking its losses over the last four days above 12%.

March wheat ended down 3.4% at $5.10 a bushel, taking its decline to 11%.

Soybeans lost a relatively-small 1.0% on the day, to close at $9.74 a bushel, leaving its fall at a modest 2.8%, on spot-contract terms.

Commercial buying?

But then there has at least been some hope of export demand even at these relatively robust values, with them lying "in line with South American offers", Mr Holaday said.

US Commodities said: "The lower value has brought out commercial buying. It appears China yesterday did buy two-three cargoes of US soybeans."

Indeed, the China National Grain and Oils Information Centre, an official body, pegged the country's soybean imports at 4.5m tonnes this month, not far behind December's record 4.78m tonnes.

Analysts have less hope for wheat exports, with few expecting the US to feature in winning suppliers for Saudi Arabia's monster 500,000-tonne tender.

"US wheat still needs to move lower in order to get in line with world markets," Illinois broker Allendale said.

Currency impact

Not that European wheat was making it easy for its Chicago rival, putting in its own decline.

Paris feed wheat dropped E1.25 to E127.25 a tonne, with its London feed equivalent shedding £1.70 at £104.00 a tonne, taking its fall for the week to about £5 a tonne.

And the euro was in Paris's favour too, slipping to $1.4388 at one point against the dollar, and so increasing the competitiveness of eurozone exports.

Indeed, February rapeseed managed a positive close, up E0.75 at E281.00 a tonne, with robust crush margins, notably in the UK, also stimulating demand.

Softs soften

Markets for soft commodities weren't much better, and this time Mr King did get a bit of a mention, with some traders saying that even one extra day's holiday was enough to stoke concerns in markets with such fast-developing news.

Still, that wasn't the only reason for declines.

"As the dollar improves and crude oil, base metals and gold have all given ground, sugar has again moved lower," David Sadler at Sucden Financial Sugar said, while giving a reminder that sell downs by index funds of one of 2009's best-performing commodities may also have been a factor.

March raw sugar closed down 0.14 cents at 27.62 cents a pound in New York, with London white sugar ending $8.20 lower at $723.60 per tonne.

Coffee did worse, with New York arabica beans for March ending down 3.60 cents at 140.75 cents a pound and March robustas closing down $21 at $1,375 a tonne in London.


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