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Evening markets: crops take heart in data and weak dollar

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Market Fortune on Thursday tipped her scales in favour of risk-on moves, helping assets including agricultural commodities close higher.

In the absence of further ructions over North Korea's missile test, markets in general were helped higher by data showing that industrial production in the eurozone unexpectedly grew by 0.5% in February.

Stocks

rose 1% or more in London, Paris and Frankfurt, and were 1.3% higher in New York in late deals.

The safe haven of the

dollar

dipped 0.6%, a help to assets such as many commodities which are traded in the greenback, making them more affordable to buyers in other currencies.

Sugar forecast

But even without that help, agricultural commodities looked set for positive closes, thanks to the turn bullish in the newsflow.

For instance, long-awaited data from Unica, the Brazilian cane industry group, on

sugar

cane production in the country's Centre South region came in, at 509m tonnes, below market expectations - and even further below the forecast from farm officials earlier in the week.

Unica blamed dry weather earlier in the year for its expectation of relatively weak rebound in output from the dismal 493m tones last year.

Raw sugar for May closed up 1.1% at 24.22 cents a pound in New York.

'Demand rationing taking place'

Among grains,

soybeans

had support from a downgrade of 1.0m tonnes, to 44.0m tonnes, in the Buenos Aires Grains Exchange's estimate of the drought-hit Argentine soybean harvest.

The US Department of Agriculture earlier this week cut its estimate by 1.5m tonnes to 45.0m tonnes.

OK, the USDA's figure for latest weekly US soybean exports, at 646,000 tonnes, old crop and new, failed to live up to expectations of at least 700,000 tonnes.

The "weak" number "implies demand rationing taking place at current price levels and Brazil is continuing to hold market share", FCStone said.

But disappointment was tempered by a separate announcement, through the USDA's daily reporting system, of 115,000 tonnes of US soybeans to China and a further 189,000 tonnes to "unknown destinations".

May soybeans gained 1.3% to $14.41 a bushel in Chicago, the highest finish for a spot contract since August last year.

'Very aggressive planting'

Furthermore, the oilseed got a lift from the new crop November soybean lot, which fought back decisively against new crop December

corn

, amid fresh reports of rapid sowings of the grain.

"Corn planting has been very aggressive in the southern half of the Corn Belt this week," Darrell Holaday at Country Futures said.

"The planting number at week's end will impressive. That reality is keeping new crop corn rallies capped."

While December corn closed unchanged at $5.46 ¾ a bushel, losing its mojo of the last session, November soybeans added 1.0% to $13.72 ¾ a bushel.

That restored the soybean: corn ratio back above the important 2.50 mark, above which favours the oilseed rather than the grain in farmers' spring sowing plans.

'Frost is likely'

Corn's weakness affected old crop lots too, with the May contract rising, but by a modest 0.2% to $6.37 ½ a bushel.

And that despite strong US export sales, of 977,000 tonnes, more than twice some market forecasts, and a number termed by Mr Holaday "very solid".

Wheat made greater headway, backed not so much by US export sales, which at 542,000 tonnes were comfortably within the range of market expectations, but by weather fears, with frost on the prowl.

"The five-day forecast is cooler in the Dakotas, Minnesota, and Nebraska," US Commodities said.

"A frost is likely. Temperatures near freezing are indicated in much of the northern Plains and eastern Midwest overnight."

'No longer heavy'

Mr Holaday said: "Next Tuesday morning will be likely be the last critical time period for the hard red winter wheat in Kansas.

"Right now temperatures are expected to dip into the 30s [Fahrenheit] and there could be some scattered frost," conditions crops could cope with.

"But the concern in the market is warranted because if the temperatures were to dip into the 20s it would be serious."

Furthermore, the idea of weather damage to European Union winter crops gained greater credence when Strategie Grains cut its forecast the bloc's soft wheat harvest by 4.3m tonnes to 126.8m tonnes, putting a fall in production on the cards.

Ominously, the Paris-based group also said: "In conclusion, the outlook for wheat [supplies] in 2012-13 is no longer heavy, either at the EU or global levels."

Wheat for May closed up 1.8% in Chicago, where soft red winter wheat is traded, at $6.39 ¼ a bushel and 1.4% higher in Kansas, the home of dealing in hard red winter wheat, at $6.53 a bushel.

In Europe itself, Paris milling wheat for May ended 0.5% higher at E209.75 a tonne, and London feed wheat up 1.6% at £174.65 a tonne, also for the May contract.

'Knee-jerk reaction'

In New York, the weaker dollar and more bullish mood reduced speculators' willingness to maintain relatively short-favoured positions in many soft commodities, such as

coffee

, which gained 1.3% to 182.90 cents a pound for May delivery.

Cocoa

extended a rebound from a three-month low reached on Wednesday, and spurred by Indonesia's quake

Lynette Tan, at Phillip Futures noted talk of "a knee-jerk reaction to a strong earthquake off Indonesia, the world's third-biggest cocoa producer".

Cocoa for May closed up 2.7% at $2,160 a tonne, $108 above the last session's nadir.

By Agrimoney.com

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