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Evening markets: crops keep time to rhythm of fundamentals

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Investors in grain markets swapped their shotguns for rifles on Monday, eschewing the one-shot-fits-all blast which has typified many trading days of late for a more precise approach.

Of course, the day held some general financial market themes, such as another after-shock in Japan, which prompted a fresh round of investor tensions for a while.


, for instance, fell back from a five-week high in London. (


fell into negative territory, but for different reasons, with growing hopes of a solution to the Libyan sending both New York and Brent crude down more than 2%)

But Chicago commodities behaved pretty much, spookily much even, as how fundamentals might be expected dictate.

Fresh record


, for instance, remained in demand, closing for May up 1.0% at a record finish of $7.76 a bushel, and hitting an intraday high of $7.83 ¾ a bushel on the way, and seeking the raised rationing point that the market has been looking for since the US two weeks ago revealed that it had 170m bushels less of the grain than the market had expected.

"Corn continues to find strength in the old crop as it searching for a price level that will stop some use," Darrell Holaday at Country Futures said.

US Commodities said: "The market needs to slow exports, slow the ethanol grid, and slow livestock consumption."

Investors appeared increasingly comfortable with the surprise forecast in Friday's USDA Wasde crop report that, despite the rundown stocks, inventories would end the crop year at a slim 675m bushels rather than super-thin levels.

Softening soybeans


, however, were treated with less respect, ending down 1.7% at $13.68 ½ a bushel for May delivery as South America's harvest continues on better form.

US Commodities said: "Soybean prices have stalled as Brazil harvest is now 77% complete. They will wrap up harvest in a couple of weeks."

Rival broker Benson Quinn Commodities added: "The rainy season in South America seems to drawing to a close, which present favourable conditions for the maturation of the late crop and allow for good harvest progress in Brazil and Argentina".

Indeed, with investors still concerned over waning demand from China, the top soybean importer, where crush margins have turned thin, soybeans might have done worse if it were not for Argentina's government stirring the pot again as regards levies on crop exports.

"Argentina is looking into the possible reimplementation of a controversial tax scheme that has lead to nationwide protests by producers in the past," the broker said.

Chicago beats Kansas

As for


, it showed significant movements even between varieties as investors reacted to the USDA's forecast on Friday of growing demand for soft red winter wheat, the type traded in Chicago.

The May lot ended up 0.1% at $7.98 ¼ a bushel.

OK, that's nothing compared with corn, but then US wheat inventories are far bigger.

And it beat Kansas hard red winter wheat for May, which dipped 1.5% to $9.19 a bushel, losing a further stack of its premium as the parched crop could be about to get some long-awaited rain.

"Temperatures over the weekend were again in the low 100s [Fahrenheit] in parts of Texas and Oklahoma," US Commodities said, although some parts of Oklahoma did get thunderstorms.

"But a cooler pattern is expected in the seven-to-10 day forecast. The extended forecast in the southern Plains is slightly wetter."

The relative performance of Chicago and Kansas "narrowed the spread that had become way too wide last week", Mr Holaday added, having reached a record above $1.50 a bushel.

Wheat vs barley

In Europe, Paris wheat actually did better than Chicago, gaining 1.0% to E248.25 a tonne for May delivery, after Algeria, a major importer of French grain, issued drought warnings for several agricultural regions, and said that a lack of rain was stressing crops.

And London wheat did even better, adding 1.3% to £209.50 a tonne for May delivery, returning £1 from the record high for a spot contract.

The improvement was helped by weaker sterling, which fell to a five-month low against the euro on expectations that eurozone interest rates would easily outstrip UK ones.

Meanwhile, the Home Grown Cereals Authority flagged how data on animal feed compounders were highlighting the squeeze in domestic supplies.

"The proportion of wheat use within overall cereal demand has fallen to 71.8%, from 73.8% in November, with barley being the main beneficiary," the authority said.

"This may be further evidence of UK demand rationing in the face of a tightening balance sheet and high wheat price."

Options, expiry, roll...

If grains proved, in the end, relatively easy to read, many softs remained difficult to predict for all but those with a firm grip on technicals.

As Nick Penney at Sucden Financial highlighted, in


, "on Friday we have options expiry on the May New York contract as well as the expiry of May futures in London.

"We may have a clearer idea at the beginning of next week on the delivery intentions for New York sugar once the result of the option expiry is known, and position limits come into play prior to expiry of the underlying futures."

Oh, and there is roll going on too from near-term expiring lots to those further ahead. Mr Penney said earlier in the day it looked like this switch had been "overdone" in previous sessions, and proved right, with New York's May contract recovering ground to close up 1.5% at 26.04 cents a pound.

The July lot closed down 0.2% at 24.84 cents a pound.

Peace at last?

As for


, the arrest of Laurent Gbagbo, the Ivory Coast president, after a four-month dispute with rival Alassane Ouattara did not depress prices of the bean has might have been expected, with fears of continuing rifts keeping New York's May contract up 1.6% at $3,022 a tonne.

Ivory Coast is the world's top cocoa-producing country.

New York


for May closed up 1.61 cents to 204.58 cents a pound, helped by another US crop downgrade in Friday's USDA Wasde report.


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