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Evening markets: crops rise as drop in euro fears lifts mood

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Weather concerns for South America eased a little, a point for bears, as some models increased chances of rainfall in Argentina late this week, improving conditions for

corn

and

soybean

crops.

But bulls had improved macro-economic sentiment on their side, after a much-watched survey of German business confidence rose sharply, while a E5.6bn auction of Spanish debt sold well too.

Eurozone crisis, what crisis?

And this proved the trump card even in agricultural commodity markets, such that the early Turnaround Tuesday feel, er, turned again to leave crops pointing upwards.

'Too battered'

Indeed, few assets could match

cocoa

, which soared 5.6% to close at $2,185 a tonne in New York for March delivery, as the better sentiment prompted investors to close unusually large short positions in the bean.

Sure, bean arrivals at ports from farms are higher in both Ivory Coast and Ghana, the top producers, so far in 2011-12. But better economic hopes would give demand a fillip too.

Shares

rose 2.8% in late deals in New York, while the average commodity gained 2.0%, as measured by the CRB index, helped by a

dollar

which eased 0.5%, so making dollar-denominated assets more affordable to buyers in other currencies.

Other soft commodities were firm too, with New York raw

sugar

adding 1.7% to 23.49 cents a pound for March delivery, while

coffee

gained 1.5% to 222.80 cents a pound, shrugging off pressure from the Central American harvest amid ideas even from some bears that selling had gone far enough – for now.

"My thinking is that the sell side is the correct side, but New York coffee has been so battered that values may need to rise to a level where it will become attractive again to sell," softs trader Jurgens Bauer said.

'Still a drought'

And the main Chicago grains reversed early losses to close higher too, led by

wheat

, which was also boosted by the (near-record) extent of net short positions – meaning it was a top target for short-covering.

Furthermore, while recent rains have eased a moisture crisis in the US southern Plains, they have not solved it.

Latest drought monitor data "still shows 100% of Texas under drought conditions", if with 41% rated as in exceptional drought, compared with 88% in mid-September, Mark Welch at Texas A&M University said.

Intriguingly, weather data collected by University College London's department of space and climate physics shows drought conditions "have started to show up in India", a major wheat producing country, Dr Welch added.

And, with investors lowering ideas of the supreme competitiveness of Argentine and Russian supplies, Chicago wheat for March added 1.3% to $6.07 ¾ a bushel.

'Chances for rain'

That was ahead of Chicago corn, which surrendered its premium, closing up 1.0% at $6.07 a bushel, given some grounding by ideas of Argentine rain.

"The crops in Argentina have some chance of moisture stress for the next few days then some relief is expected, "Paul Georgy at broker Allendale said.

Iowa-based US Commodities said: "There are chances for rain in some parts of Argentina later this week and into next week with 40% coverage receiving up to one inch of rain".

Furthermore, there are "some chances for precipitation short term for the southern Brazil areas," also a region of concern, "but the warm temperatures are expected to return quickly in the six-to-15 day outlook".

And there was some highly negative technical analysis out, suggesting corn futures may have $1 a bushel to fall.

"Wave pattern chartists are signalling that corn may fall to $5.06 a bushel over the next three months," US Commodities said.

'Poor crush margins'

Still, even corn was ahead of soybeans, which are thought less vulnerable currently from dry South American weather, being later sown, and with a no-sale in the latest Chinese auction of the oilseed pressing on prices too.

"China sold none of their offered 309,000 tonnes soybeans from state reserves," GrainAnalyst trader Matthew Pierce said.

"This is due to poor crush margins that remain negative. Chinese margins show a pulse once in a while but that is snuffed out by poor economic expansion number."

Chicago soybeans for January closed up 0.7% at $11.44 ½ a bushel.

In Europe, Paris wheat showed a small gain too, adding 0.4% to E183.25 a tonne for March, balancing a supportive Chicago price with the negative impact of a firm euro.

London wheat for May edged 0.1% lower to £146.55 a tonne.

By Agrimoney.com

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