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Evening markets: grains, cotton weakest of mixed ags bunch

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Agricultural commodities started brighter than shares, but couldn't keep up the pace. This time, there was no late buying spree to lift grains to a positive close.

Shares managed a convincing rebound by late deals, standing up 1.6% in New York.

The recovery in stocks was helped by comments from the Federal Reserve, the US central bank, which mixed the bad news, including a downgrade to US economic growth forecasts, with some language viewed as encouraging in terms of showing willingness to help financial markets.

But many commodity markets preferred to look the problems still facing the eurozone, following Greece's shock referendum announcement, the factor blamed for pulling back gains in Brent

crude

, for instance to 0.1%.

This despite the

dollar

losing 0.3% to make dollar-denominated assets more appealing to buyers in other currencies.

'Under pressure from heavy deliveries'

Among farm commodities finding headway hard to hold were

soybeans

, which closed up 0.1% at $11.93 ½ a bushel for November, having touched $12.08 a bushel earlier.

"Soybeans are under pressure from the heavy deliveries" against the expiring November contract "and the fear the export pace will remain soft," US Commodities said.

These fears came despite assurances from Oil World on Tuesday that US shipments were about to recover, with South American stocks running dry.

Ideas about the South American harvest had a bit of an on-day too, with Paul Georgy at Allendale noting that "weather remains good" in the region.

China rumours, as ever

However, the oilseed did have a couple of things going for it, one being the latest round of speculation of Chinese buying.

"There are rumours that China bought two-to-three cargoes of soybeans yesterday on the price break," Darrell Holaday at Country Futures.

Indeed, technically, there was an idea that the soybeans' particular weakness in the last session compared with grains, blamed on the unwinding of short soybean-long

corn

spreads, performance, had mutated the price gap between the two crops artificially low.

Broker forecasts

In other words, if soybeans found positive territory hard to keep, corn found it impossible, dropping 1.4% to $6.51 a bushel for December delivery.

A forecast by Informa Economics of a yield of 149.5 bushels per acre hardly helped, being viewed as slightly bearish, in coming in level with the group's estimate last month, besides above the US Department of Agriculture figure (which stands to be updated next Wednesday).

Other brokers have been trimming their forecasts.

Nor did CF Industries help bulls in pegging US corn sowings at 93.5m acres next year, a figure which would challengethe post-World War II high.

Ethanol spree

That took the steam out of some positive ethanol data, with US production soaring to 919,000 barrels a day last week, from 906,000 barrels the previous week.

"This why the basis is strong as ethanol producers are bidding up to get supplies of corn. Corn price breaks will be very limited in the current environment," Mr Holaday said.

US Commodities said that ethanol plants "are now operating at full capacity into year end" to exploit margins of about $0.50 a gallon, although where these end up after the US government, as looks likely, fails to renew corn ethanol tax perks….

"Blending margins will be very thin 2012 without the subsidy," the broker added.

'

Providing strong support'

And if corn was weak, what chance did

wheat

have, with its far more ample world supply dynamics?

Well, wheat had one, with talk that the USDA is to resurvey (again) spring wheat acres, with sowings of the grain heavily disrupted by spring rains.

"An adjustment down in hard red spring wheat acres may be in the cards and therefore lower production numbers," Mr Holaday said.

"This is providing strong support in the Minneapolis market," where hard red spring wheat is traded.

Indeed, December wheat rose 0.5% to $9.10 ¼ a bushel there, limiting Chicago wheat's losses to 1.0% for December delivery, taking the contract to $6.23 ½ a bushel, and at least ensuring it did better than corn.

Still, Paris wheat did better still, rising 0.9% to E189.50 a tonne, seen as taking some succour from Egyptian tender results on Tuesday showing that French wheat had closed the price gap with rival Black Sea supplies.

In London, the best-traded May wheat contract closed up 0.4% at £154.00 a tonne.

'Rumblings of Malaysian offtake'

Among soft commodities,

cotton

dropped, closing down 1.2% at 98.34 cents a pound for December delivery, weakened by a lift by the International Cotton Advisory Committee to its forecast for the world surplus in 2011-12, and a warning of a "significant decline" in prices.

But

cocoa

managed to stage a rebound, by 2.5% to $2,665 a tonne in New York, for December delivery, if only thanks to profit-taking by holders of short positions following its near-4% decline in the last session.

Indeed, speculators' net short position in cocoa is approaching historic highs, creating wariness about how many more bets on price falls they will place.

New York raw

sugar

added 0.3% to 25.42 cents a pound for March, amid continued talk of buoyant short-term demand.

"There still seem to be rumblings of Malaysian offtake just below the market," Thomas Kujawa at Sucden Financial said.

That said, there are doubts about its longevity, and later lots eased.

By Agrimoney.com

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