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Evening markets: grain futures keep up their contrary streak

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Grains' strings are being pulled by different hands to those of other markets.

The growing contrariness of corn and wheat futures, as evidenced last week, developed further on Monday, when they achieved notable gains, even as other risk assets fell.

The negative moves of most soft commodities, and Chicago soybeans, was more in tune with the prevailing market mood, deflated by a tirade of negative snippets.

These included the collapse of the coalition government in the Netherlands, disappointing results from ConocoPhillips, allegations of bribery in Mexico against Wal-Mart, the growing chance of a Socialist president in France, and an official forecast that Spain's economy shrank by 0.4% in the January-to-March quarter.

Spanish shares dropped towards nine-year lows, while London stocks shed 1.9%and German shares 3.4%, while New York equities stood 0.8% lower in late deals.

Softs soften

The safe haven of the

dollar

added 0.3%, making dollar-denominated assets such as many commodities that much less appealing to buyers in other currencies.

So it was hardly a surprise that the CRB commodities index fell 0.3%, and some soft commodities even more.

Cocoa

dropped 2.9% to $2,204 a tonne for New York's best-traded July contract, while

orange juice

plunged 5.7% to 142.65 cents a pound, a 19-month closing low for a second-in contract, with good growing weather in Florida providing extra pressure on prices.

New York raw

sugar

did well to close down just 0.1% at 21.54 cents a pound, an 11-month low for a nearest-but-one contract, given the continuing talk of Indian exports.

"There is a rumour that [India] will free up exports completely, no limit as to quantity and no need for licences, but that there will be a time limit for these," Nick Penney at Sucden Financial said.

Still, prices were helped by strong Chinese sugar import data - which showed what Barclays Capital termed an "impressive rebound" last month to 263,300 tonnes, up 180% month on month – and a 50,000-tonne order by Egypt.

'Buying on this break'

But in Chicago, grains managed not just gains, but healthy ones, with May

corn

adding 1.6% to $6.22 ½ a bushel, and the better traded July contract gaining the same to $6.12 ½ a bushel, pulling

wheat

higher with them.

And this despite expectations that US Department of Agriculture data later on Monday will show corn sowings reaching 30%, 35%, 40% completion. Whatever, historically very fast, implying potentially higher sowings and yields.

Still, in grains' favour was the fact that they got their losses in early, with corn falling last week to among its lowest levels of 2012.

Furthermore, that speculation of Chinese buying of corn was back in force, and bigger than the 500,000 tonnes being oft-talked about last week.

"The rumour mill continues to circulate the possibility of China's Sinograin and private firms buying 1m-1.5m tonnes of old and new crop corn on this break," Benson Quinn Commodities said.

US Commodities went even higher: "The rumours remain this morning that China has purchased up to 700,000 tonnes of old-crop corn and 1.3m tonnes of new-crop corn."

Actual imports

OK, nothing much appeared in the way of confirmation, although the USDA did unveil 120,000 tonnes of US corn sold to "unknown destination", which traders took to be China, and so acted as a bit of an appetiser to a main course yet to appear.

And for the record, China's customs data showed its corn imports at 472,000 tonnes in March, easing 9% month on month, but a figure Barclays Capital termed "strong".

During the first quarter as a while, China's corn imports hit 1.74m tonnes which, as FCStone noted, "was more than all of last year, at this pace they will import more than the USDA estimate".

'Poor spring planting conditions'

Furthermore, weather setbacks appeared too.

Darrell Holaday at Country Futures noted "some concern about the cold temperatures that invaded the Midwest and the Ohio Valley this weekend", with more cold on its way.

That is a potential setback for wheat too.

FCStone noted that "some cold temperatures over central Kansas overnight may have done a bit of damage to the wheat crop, and there is another round of cold air called for next weekend."

And, sticking with wheat, European Union farm statisticians flagged a lack of rain in Germany and parts of central Europe, even while easing fears over French and UK crops.

Such dryness issues may be creeping even further east too.

"Sudden heat and dryness has developed in April in European Russia, an area that was persistent wet and cold through mid-March," Gail Martell at Martell Crop Projections said.

"Poor spring planting conditions from drought are anticipated in Russia's eastern grain belt in Urals, Siberia and eastern Volga."

Price moves

Chicago soft red winter wheat for May gained 1.5% to $6.25 a bushel, and for July, the same to $6.32 ½ a bushel.

Kansas hard red winter wheat for May gained 1.5% to $6.35 ¼ a bushel for May, and to $6.45 a bushel for July.

Speculators' large net short position in Chicago wheat, and maiden net short in Kansas, only dissuaded sellers in questioning how much further selling pressure remained unfulfilled.

That Paris wheat for May closed down 0.7% at E215.00 a tonne was seen as down to European economic concerns, besides its relative non-competitiveness compared with US grain.

'Uptick in China's imports'

Chicago

soybeans

fell 0.7% in too for May delivery, to $14.37 ¼ a bushel, with the better-traded July lot losing 0.6% to $14.41 a bushel, in part down to Brazilian denial of talk of export curbs.

Benson Quinn also noted the influence of the huge net long position investors have in the oilseed, unlike in corn and, especially, wheat.

"The disconnect between price action in soybeans compared price action in corn and wheat can be attributed to soybeans having a record net long fund position, while wheat has a record net short and funds have pared their net long fund position in corn considerably," the broker said.

Indeed, investors got a touch of vertigo despite more positive news on Chinese purchases of US soybeans, with the USDA reporting the sale of 165,000 tonnes (thought to be to China) through its daily reporting system.

Meanwhile, China's customs data showed its actual imports rising 26% from February, following three months of decline.

"We anticipate an uptick in China's soybean imports in 2012 and, indeed, imports at 4.8m tonnes for March were up by 37% year on year," Sudakshina Unnikrishnan at Barclays Capital said.

By Agrimoney.com

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