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Evening markets: eurozone doubts snuff out crop market hopes

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If Monday was a day when Chinese news emerged to trump that from the eurozone, Tuesday was the opposite.

China helped grains off to a firm start with talk hardening that it has bought a stack of Australian wheat, believed to be about 500,000 tonnes of milling grade.

This on top of a forecast by the official CNGOIC crop think tank that China would buy a hefty 5m tonnes of corn in 2011-12, a figure the market may have factored in, but a surprise nonetheless.

However, then doubts over the eurozone debt rescue crisis emerged to sharpen bears' claws.

The cancellation of a meeting on Wednesday of a meeting of European finance ministers, aka Ecofin, raised doubts over the deliverability of a rescue package, although the summer by European Union leaders will still go ahead as planned.

Storm misses

Many risk assets lost ground. Wall Street


stood 1.2% lower in late deals, with


and Brent


reversing early gains to post small losses.

And farm commodities struggled too, none more so that


, which, having also posted minimal gains earlier, collapsed to close down 5.7% at 236.55 cents a pound in New York for December delivery.

The drop was attributed to talk that Hurricane Rina, which was expected to cause havoc in Central American coffee and cane district, will after all largely miss the area.

Sure, thin stocks of deliverable coffee in New York, speaking of thin producer selling, and a more disappointing outlook for Colombia's crop remain supportive to prices. But these had been priced in coffee's rebound of late, including a 2.4% rise in the last session and 5.7% on Friday.

'Looming export decisions'

The fresh Rina forecast played a role in a fall in


futures too, down 0.6% to 26.94 cents a pound in New York for March delivery.

Furthermore, as Nick Penney at Sucden Financial noted, "looming export decisions by India on the horizon could create a ceiling on prices".

The flood threat which remained alive and worrying was that in Thailand, the second-ranked sugar exporter, to keep some strength under prices of the sweetener.

They helped rice too, of which Thailand is the top exporter. Chicago rough


for November added 1.2% to its limit-up close of the last session to finish at $17.10 a hundredweight.

Traders take the sidelines

And that was a pretty good performance in Chicago grain terms, with the big contracts losing ground as investors backed off ahead of Wednesday's latest make-or-break eurozone talks.

"Traders have reduced their daily involvement in the markets waiting for a decision out of the eurozone," Paul Georgy at Allendale said.

That came ahead of some bullish points, such as forecasts for continued dry weather in Ukraine, where rain is needed, and wet weather in Western Australia, which wants fair conditions to speed harvest.

Furthermore, concerns remain about the US southern Plains, where a lack of rain remains a problem for hard red winter



'One chance for rains'

"There is one chance for rains tomorrow night into Thursday morning over central Kansas extending into northern Oklahoma. This offers a much-needed drink," GrainAnalyst trader Matthew Pierce said.

"The problem is the accompanying frost. Temperatures are expected to fall into the upper 20s [Fahrenheit] for an extended period offering a bit of caution for producers that are looking at this rain as a saving grace.

"Another problem is there is nothing behind this system. There are no rains in Kansas, Oklahoma or Texas for the 10 days following this system offering another leg up for bulls heading into hibernation."

And the condition of hard red winter wheat sowings was poor so, US Department of Agriculture data overnight showed, with 47% in good or excellent health, the same as last year's drought-affected crop. Two years ago, the starting figure was 62%.

'Values are all over the place'

Still, even hard red winter wheat, traded in Kansas, succumbed to the progressive selling, ending down 0.2% at 7.33 ½ a bushel for December delivery.

Chicago soft red winter wheat, without such help from fundamentals, closed down 1.0% at $6.36 ½ a bushel for December.

Nor did it get much help from Chicago


, which faded to close 0.25 cents lower at $6.50 ¾ a bushel for December.

And what to reference it against, in such uncertain times?

"World corn values are all over the place. China is near $9 a bushel. Black Sea at $6 a bushel and the US corn is around $6.50 a bushel nationally," US Commodities said.

'A good start'

Nor were prices helped by growing talk of a positive South American sowing season, an idea supported both by DuPont, the owner of seed group Pioneer, in comments from a range of brokers.

"Weather conditions in South America are providing a good start to their summer crops," Mr Georgy said.

Oil World analysts said that "planting and growing conditions improved significantly in the last two-to-three weeks after the required rainfall had arrived in most major


growing areas.

"South American soybean production may exceed expectations in early 2012."

That was hardly a help for Chicago soybeans, which fell back to close down 0.1% at $12.25 ½ a bushel.


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