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Evening markets: crops smashed by collapse of oil and metals

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It could have been worse for agricultural commodities.

They could have included

tin

, which lost 7%, or

silver

, which plunged for a fifth successive day, losing more than 20% in that period, and putting it on course for its worst week in 28 years.

Oil

tumbled nearly 9%, taking New York crude back below $100 a barrel, helping take the CRB commodities index down 4.9%, its worst performance for at least two years.

Judged in comparison, the falls in crops, even the 4.9% plunge in cocoa, were positively benign.

'Very negative'

The cause of the slump were in part the same as in the last few sessions – concern over faltering demand for raw materials in the face of tighter economic policy, as central banks get to grips with inflation.

However, Thursday gave investors two other reasons to worry. One was a weak report on US jobless claims, which surprised economists by rising to an eight-month high of 479,000.

"This is a very negative number," Darrell Holaday at Country Futures said.

The other was a jump in the

dollar

, which soared 1.4% against a basket of currencies, in part on a covering of short positions, following its drop to a three-year low, fuelled by a "flight to safety" theme, with the greenback, for all its faults, viewed as a safe haven.

And as if a stronger greenback on its own isn't bad enough for dollar-denominated assets, making them less competitive as exports, the revival also involved the unwinding of a popular "long commodities, short the dollar" trade.

'Liquidation day'

Mr Holaday put it so: "It has been a liquidation day in the entire commodity complex."

US Commodities said: "General commodity selling continues. This has cast a negative blanket over all the markets."

Dave Hightower at Hightower report said: "A patently bearish mentality remains in place. The fact that severe technical damage has been forced on a number of charts adds to the liquidation pressure.

You get the picture. "The markets do not seem to be in a position to embrace anything positive."

'Planting situation is grim'

But there were at least willing to think less negatively about agricultural commodities, given the weather challenges that Canadian and US producers still face to get their spring crops in the ground.

"The next 10 days will still remain a challenge for the

corn

farmers across large swathes of the Corn Belt and northern Plains, with rains and mostly below-normal temperatures leaving only few opportunities for drying of fields," Benson Quinn Commodities said.

The problem is in the main the eastern Corn Belt, where WxRisk.com said that weather models showed that it "never stays completely dry and the temperatures remain quite cool through the 11-15 day [period ahead].

"In short it does not look favourable for good drying east of the Mississippi river."

Matthew Pierce at PitGuru said that "the planting situation is grim in the south, with replanting talk heard all over the region of Arkansas, Tennessee, southern Illinois, Missouri and Lousiana".

'Not glowing'

Still, bulls hardly held all the cards, what with a flagship Kansas

wheat

crop tour coming up with some resilient yields, although whispers after the close of trading appeared to suggest that production estimate may fall short of market forecasts.

And weekly US export sales data were weak too, notably for

soybeans

which, at 21,600 tonnes, came in at less than 10% of some of the more optimistic forecasts.

"The export sales report was certainly not glowing," Mr Holaday said.

Soybeans for July closed down 2.1% at $13.21 ¾ a bushel in Chicago, roughly in line with the grains. July wheat fell 2.3% to $7.54 a bushel in Chicago and 2.4% to $8.57 a bushel in Kansas, which trades the dry-challenged hard red winter crop assessed by the crop tour.

Chicago corn for July lost 2.8% to $7.08 ¾ a bushel.

'Drought stress'

European grains were protected somewhat by weaker currencies, following the dollar revival and decisions by both the European Central Bank and Bank of England to keep interest rates on hold, and better export data.

The European Union cleared a respectable 305,000 tonnes of wheat exports this week.

And the region of course has its own weather concerns.

"Northern Europe remains dry, with reports that the German crop is now stressed due to the lack of rain, with potential yield losses," Gleadell, the UK grain merchant, said.

"In the UK, rain is expected in the next few days although the amount due to fall in the dry east and south is hard to determine."

Paris wheat for May closed down 1.2% at E244.25 a tonne, with London's May lot shedding 0.7% to £203.00 a tonne.

Softs soften

But New York soft commodities were exposed to the full force of the rising dollar, prompting a 4.9% drop to $3,055 a tonne in July

cocoa

, and a 2.1% fall to $288.25 a tonne in July

coffee

.

Sugar

for the same month lost 2.3% to 20.86 cents a pound, an eight-month closing low, and

cotton

fell too, if failing to repeat its frequent trick of a move the maximum daily limit.

The July lot ended down 3.1% at 146.86 cents a pound.

By Agrimoney.com

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