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Evening markets: crops slip on Greece downgrade

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Shockwaves from Fitch's downgrade of Greece made it as far as Chicago commodity markets, leaving all the major food commodities under water bar corn.

The downgrade of Greece's sovereign debt to BBB+, with a negative outlook, hit US crops where it hurt – in the dollar exchange rate.

The dollar gained against most currencies as investors fled back to their favourite safe haven. Against sterling, for instance, it added 1%.

But all eyes were on the euro, the currency of Greece along with other big mainland European states such as France and Germany, which fell below $1.47 to its lowest for more than a month.

With a stronger greenback making US crops less competitive as exports, the third successive day of dollar gains against the euro hit food commodity prices across the board.

Softs soften

While losses were not huge, they were consistent, sending sugar down 1.0% in New York despite a further downgrade by Brazil's cane industry to hopes for the 2009-10 harvest in the country's key Centre South district.

New York cocoa lost 0.5% for March, pulling its London counterpart back after matching a 25-year high (and even though it is denominated in sterling).

Even New York orange juice, often a contrary mover, got caught up in the slump, losing 1.0% for January delivery.

And this despite data showing a slide in Brazilian exports by at least 40,000 tonnes to no more than 1.25m tonnes.

Snow bound

At least Chicago corn showed some resilience, crawling to a positive close of 0.75 cents for the December contract, which ended at $3.69 ½ a bushel.

The March lot added 1.25 cents to $3.85 a bushel.

Headway was supported by the prospect of a winter storm sweeping through the Midwest, bringing snow and high winds, and halting the long-delayed US corn harvest with 1.5bn bushels yet to cut.

"Eight to 14 inches [of snow] will fall by Wednesday night," Illinois broker Allendale said.

"Nebraska through Wisconsin will see the brunt of the system. A second run of precipitation, albeit smaller, will fall early next week."

Investor tactics

Meanwhile funds were buyers of 4,000 corn lots.

"This isn't a large amount but on a slow day like today, it has a greater impact on the market than would be the case on a busy day," Vic Lespinasse, GrainAnalyst.com analyst, said

And spread investors accentuated corn's strength by snapping it up while selling, or shorting, wheat.

"JP Morgan, for example, did 200 in the March [contracts] while locals and commission houses have been doing the same, supporting corn while weighing on wheat," Mr Lespinasse.

Indeed, wheat ended down 1.4% at $5.19 ¼ a bushel for December – the lowest close for the spot contract for more than a month – while March wheat closed 1.5% lower at $5.39 ¾ a bushel.

Brazil upgrade

Even soybeans were caught up in the rout, despite another strong performance by their Chinese peers overnight.

However, an upgrade by Brazil to its harvest forecasts to 64.56m tonnes, from a range of 62.50m-63.60m tonnes, spoiled the mood.

The country will have 25.9m tonnes to export, forecasts from crop supply agency Conab said, more than the 23.95m tonnes Washington is estimating.

January soybeans ended 9 cents lower at $10.44 a bushel.

By Agrimoney.com

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