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Evening markets: crops struggle as dollar rises

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Maybe the idea about pre-Christmas malaise was the right trading strategy after all.

The fund-buying thesis which supported Chicago prices in the last was absent on Tuesday, leaving crops to try their luck against a stronger dollar, and in thin trading volumes.

They managed with mixed success against a greenback which touched its highest level for two months against the euro, which is suffering something of a negative newsflow.

Last week's downgrade to Greek sovereign bonds has raised problems for debt in other eurozone countries, notably Spain, while Austria said it had put its fourth-ranked bank on a watchlist.

Add in a survey showing weak German investor sentiment, and there was a recipe for the euro falling nearly to $1.45 against the dollar, and making US exports less affordable in Europe.

China, again

Soybeans did best, closing unchanged at $10.55 a bushel for January delivery, helped by a positive close on China's Dalian exchange overnight.

Prices in China, the biggest importer of US soybeans, have become a crucial indicator for Chicago traders.

Furthermore, Washington announced the sale of 290,000 tonnes of US soybeans to China for the 2009-10 crop year.

When, as US Commodities put it, "the US soybean market is now as good as China's trading moves", that was supportive even as more and more analysts are piling in with upbeat estimates for the South American crop which will come onstream early next year.

Australian statisticians came in with a 57.2m tonne estimate for Argentina, well above US estimates, while Oil World forecast imminent pricing pressure from South American production.

Taiwan order

Corn did its best to put on a positive finish in Chicago, ending 1 cent lower at $4.07 ½ for the March contract, on its first full day as the spot lot.

Taiwan helped by buying 120,000 tonnes of US corn while, interestingly, dealing data from Monday showed 9,000 positions were closed, which traders attributed to short-covering.

Wheat was worst off, slipping 6.75 cents to $5.36 ¾ a bushel.

Continued attacks over the grain's huge supply fundamentals were, this time, reflected in fund movements, with their selling estimated at 2,000 lots with some way in the trading day to go.

Euro help

At least the weaker euro helped European crops close off day-lows, with Paris's January contract ending down E0.50 at E129.50 a tonne, while London's lot for the same month ended up £0.20 at £105.50 having spent most of the day in negative territory.

The currency move is well timed too, from a European perspective, with Egypt announcing its next wheat tender, the results of which will be unveiled on Wednesday.

The prospect of a cold snap causing some winterkill to Black Sea crops, and potentially western European ones too, also began to gain some attention, if not tipping the needle much while damage remains theoretical.

By Agrimoney.com

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