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Evening markets: crops show mettle after thumping by USDA

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So much for a "boring" report.

Many people had expected the US Department of Agriculture's December Wasde crop report to be something of a non-event.

Sure, the monthly report series might be a touchstone for agricultural commodity investors, but the December version does not alter the important US crop production figures, often the centre of market focus.

Supplies expand

But USDA statisticians found many other numbers to twiddle with, and with bearish effect, at a domestic and world level.



supplies were raised thanks to better hopes for Argentine, Australian and Canadian crops, meaning more competition for US supplies, and a 50m-bushel cut to export hopes.



, US export hopes were cut too, thanks to strong competition from Brazilian alternatives, and further underlining the idea raised by Macquarie's Alex Bos to of America as "an island of high prices".



, the trouble was a reduction in domestic industrial use, meaning the domestic stocks estimate was lifted here too, albeit by a small amount.

'Not a bullish number'

Still, the data were widely viewed as "bearish".

Not all the numbers were bearish, but maybe the best way to describe the numbers is that they are not all bearish, but there is not a bullish number in the pack," Darrell Holaday at Country Futures said.

"Trade had been leaning bearish this report due to slow pace of global export trade and increased competition due to larger global production. But we see this report as more bearish than numbers being traded ahead of report," Benson Quinn Commodities said early on

"We see today's data having the potential to push all three markets through the November lows."

'Real sign of the times'

Which is pretty much what happened in early deals. Wheat for March tumbled 2.2% to $5.84 a bushel, the lowest for a nearest-but-one contract since July 2010.

Soybeans for January touched a 14-month low at one point, of $11.00 ¼ a bushel.

Corn for March avoided, just, setting its own 2011 low, despite a 2.5% retreat.

After all, it was not as if the Wasde was the only poor news, with China, for instance, buying corn, (but from its own farmers than the US) to stabilise prices.

"This is a real sign of the times. Just a couple months ago they were selling reserves to cap the prices," US Commodities said.

And heading back to the Wasde, Offre & Demande Agricole said it expected "fewer rumours regarding purchases of corn from China" following upgrades to the country's production estimate.

'Buying starting to surface'

But then something of a rebound kicked in.

"There is some buying starting to surface in all of the grains and they have moved well off their lows of the day," Mr Holaday said as trading approached it closing stanza.

"The surprise is that the wheat market has been much stronger than expected."

The March wheat lot had recovered to $5.95 a bushel, down 0.3% on the day, with some 30 minutes of trading left, with corn for March down 1.3% $5.92 ¼ a bushel.

Soybeans remained the slowball, down 1.9% at $11.11 ½ a bushel,

Summit reaction

Part of the recovery was down to sentiment over one of Friday's other events, the eurozone summit, taking a turn for the better, with many seeing countries making surprising strong progress towards the fiscal union which would put the eurozone on a stronger footing.


were 1.4% higher on Wall Street, while the safe haven of the


lost 0.2% and the


, the so-called "gauge of fear", tumbled 10.4%.

But there were also some more tempered views expressed about the Wasde.

At Societe Generale, Michael Haigh said he remained bullish on corn, given that the stocks revision, while in a bearish direction, was only marginal in its extent.

And Rabobank said it as the macro economic situation which "will continue to dominate" agricultural commodity markets until a USDA stocks report in January.

"Virtually no rain…"

Furthermore, the bank issued a reminder that "it will be important to monitor the increasing dryness in the Black Sea region which has damaged the 2012-13 winter wheat crop, as demonstrated by poor emergence prior to its winter dormancy".

And crop meteorologist Gail Martell focused back on the weather in South America, which is in the spotlight in particular in this, a La Nina-affected season.

She said: "Virtually no rain has occurred for two weeks in south Brazil. This is unusual".

'Mildly bearish'

Among soft commodities,


was drawn into the Wasde, with the USDA lifting its estimate for world stocks at the close of 1022-12 by 2.7m bales, to 57.7m bales, reflecting lower expectations for consumption in many countries, such as China, India and Turkey.

Rabobank termed the report "mildly bearish", which was just about the mood in New York, where the March cotton lot fell 1.6% to 90.58 cents a pound.

Indeed, raw


did worse, trading down 3.0% at 23.40 cents a pound in late deals, erasing many of the last session's gains.

"Global sugar markets continue to swing erratically," Luke Mathews at Commonwealth Bank of Australia said.

Not that there was an obvious explanation offered, although some have put it down to pains as the market factors in a return to actual surplus.


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