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Evening markets: fund mercy gives grains relief

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Selling pressure continued in Chicago on Wednesday, but was this time aimed mainly at soybeans, with the grains recovering a touch of gusto in afternoon deals.

Investors held their breath in the closing minutes of trading, which has become a true climax of the trading day since it was used by index funds two weeks ago as their buying window. (Seems so long ago.)

"I expect renewed selling and a test of the day's lows later in the session in most pits," Vic Lespinasse said with an hour or so of trading to go.

An hour later, he was able to report: "I expected a sell off late in the session but prices continued to firm up, especially in wheat and corn, which only ended slightly lower."

And this despite a dollar strengthened by the results in Tuesday's Republican victory in Massachusetts, which was seen as potentially helping put the brakes on America's fiscal spending.

Against the euro, the dollar strengthened to a five-month high of $1.41. A strong dollar is bad news for US crop prices, making them less competitive on export markets.

Dead cat bounce?

The trigger for Wednesday's soft landing for grains was a tail-off in fund sales.

Some 5,000 corn contracts and 3,000 contracts were estimated sold, but mainly in the morning. And the absence of further sales in the afternoon encouraged some investors with short positions to close up and take their profits.

The market is, after all, as US Commodities put it, "deeply oversold", although bulls should not take too much heart. The broker added that any revival in prices would be of the "dead cat" variety, an expression reflecting the observation that even an expired feline can bounce if dropped from high enough.

Still, corn's close down 1.25 cents at $3.68 a bushel for March, while its seventh successive negative finish, was 5.75 cents above early levels, which it touched its weakest since early November.

March wheat ended down 2.5 cents at $4.98 a bushel, but at least more than halved its losses from earlier, when it touched a three-month low.

China cracks

Soy was one bean, however, which didn't bounce, finishing on a three-month low, with China continuing to be a big worry.

The latest move by the world's biggest importer of soybeans, and notably American ones of late, was to limit bank lending.

As broker Benson Quinn Commodities said: "With China regulators applying the brakes to economic expansion analysts are concerned their economy will not grow at the 10-12% previously estimated - thus, slowing demand for commodities in China."

Soybeans for March ended down 1.4% at $9.50 a bushel.

European wheat

And what of European crops? Not even the weaker euro could bring a smile to Paris wheat, which closed unchanged at E125.75 a tonne for March delivery.

So there was little hope for London wheat, which faced the headwind of relatively-strong sterling, which hit a five-month high as falling unemployment added to thoughts of economic recovery.

The March contract closed down £0.90 at £100.25 a tonne.


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