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Evening markets: exports, weather see ags defy risk-off mood

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Crisis, what crisis?

Many assets, such as


, suffered another day of liquidation, undermined by Europe fears, with Spain officially in recession and its banks set for downgrades, and the European Central Bank restricting lending to some Greek banks amid uncertainty over the country's future in the eurozone.

But agricultural commodities refused to cave in, helping the CRB index scrape 0.1% higher by the close despite weak performances in the likes of oil. Brent


lost more than 2%, to fall below $108 a barrel to a 2012 low.

Two-year lows

OK, New York

orange juice

flew the flag for bears, plunging 6.2% to 105.85 cents a pound for July delivery, the lowest for a spot lot for more than two years, sapped by an absence of weather scares and a vicious circle of weakening technical factors.

Who wants to catch a falling knife?



struggled, as befits one of the few non-food agricultural commodities, more exposed to macro-economic uncertainties.

Luke Mathews at Commonwealth Bank of Australia noted how "the instability in Europe, including rising bets that Greece will be booted from the euro" have weighed "heavily on the economically-sensitive fibre market".

Weekly US export sales, at more than 250,000 running bales, were hardly disastrous, and limited to 0.4% the drop in New York's July contract.

Still, that was enough to take the lot to 76.65 cents a pound, a two-year low for a spot contract.

'Becoming more serious'

But many other crops put in a strong performance, notably of course wheat, lifted in the main by concerns over Russia's drought, which has attracted cautions from the likes of Australia & New Zealand Bank, FCStone, Macquarie, SovEcon etc over the past 24 hours.

The issue is discussed in at greater length here and here.

But in brief, as Paul Georgy at Allendale said: "Dry conditions in Russia and Kazakhstan are becoming more serious," noting that similar fears are surrounding the western portion of the US southern Plains.

"Large traders have been heavily short wheat. Until rains arrive, expect more short-covering," he said.

Prices rise

Weekly US export sales of more than 700,000 tonnes, old crop and new, were viewed as healthy too.

Wheat for July soared 3.0% to $6.57 ¾ a bushel in Chicago, and by 2.4% to $6.72 a bushel in Kansas.

In Europe, Paris wheat for November, the best-traded contract, gained 1.8% to E207.00 a tonne, the contract's second-highest finish since June last year.

London wheat for November added 1.2% to £153.80 a tonne, its best close for all of two weeks.

'Strong basis levels'

That helped


too, as did its own weekly US export sales of more than 860,000 tonnes, old crop and new combined, a figure termed "solid" by Darrell Holaday at Country Futures.

Then there was the factor that cash prices remain high, contrasting with the poor values expected ahead (Macquarie downgraded its corn price forecast on Thursday) thanks to expectations of a record US crop.

"Strong basis levels are pushing the old crop corn higher. The industry needs old crop supplies, but they do not want large amounts that they might get caught with," Mr Holaday said.

Indeed, old crop July corn, adding 0.8% to $6.25 a bushel, outperformed the new crop November lot, which added 0.4% to $5.28 ¼ a bushel.

Old vs new

There was something in the old crop versus new crop dynamics going on in soybeans too, after a mixed export sales performance.

"Soybean net sales of 673,400 tonnes were disappointing," Benson Quinn Commodities said.

But that was down to a weak performance on sales of this year's crop.

"Old crop sales of 616,300 tonnes were above trade's expectation for 400,000 tonnes and will support old crop contracts as July is expected to continue gaining over November."

As an extra incentive for traders to prefer old over new, the US Department of Agriculture through its daily alerts system unveiled the sale of 480,000 tonnes of – 2011 crop – soybeans to China.

Chicago's July lot finished up 1.1% at $14.38 a bushel, while the November contract gained a modest 0.3% to $13,06 ½ a bushel.

'Cocktail party talk'

Back in New York, raw


managed another positive finish too, adding 0.6% to 20.86 cents a pound.

There is plenty of bearish talk around about the sweetener, of the kind which drove the contract to a 20-month low (for a spot lot) of 20.07 cents a pound on Monday.

"We expect sugar prices to continue to be weighed by a combination of a large global surplus and expectations of additional Indian exports," Kate Tang at Barclays Capital said.

However, as Sucden Financial, itself bearish on sugar, noted earlier this week, there is nothing like a consensus on prices to send them jumping the other way.

And bulls did have some cards to play, with Sucden noting a focus on "India's ever-changing export policy and the realisation that India has not really 'freed up' exports.

Also, "cocktail party talk" at New York sugar week "regarding Centre South Brazil reducing estimates for the current crush may have had a part to play" in price strength, Sucden's Nick Penney said.


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