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Evening markets: grains rally on talk of duo of export bans

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There's nothing like talk of export bans to cheer crop bulls' hearts.

After all, a lack of supplies from a major exporting country means more competition for supplies from elsewhere, and thereby higher prices.

On Tuesday, the market had a pair of bans, or restrictions, to deal with. Or, at least, talk of two.

The first was the one that Agrimoney.com trailed on Monday, by Russia, after the strong pace of its early-season exports put it on track to clash with a government export ceiling.

In Europe, UK grain traders at a major commodities house noted "talk that Russia could impose an export tax before the end of the season to stem the flow of wheat, and in doing so potentially push demand to the US".

In the US, one source reported market talk that a Russian ban will be imposed in March-April.

And at broker Country Futures, Darrell Holaday said such speculation "put a strong bid underneath the corn and wheat markets after a lower opening".

'Rumours are out there'

The second ban was rumoured for Argentina, prompted by drought damage to its

corn

and

soybean

crops.

Oil World extended the round of downgrades for Argentine crops by cutting its estimate for the soybean harvest by 1.5m tonnes to 48.5m tonnes, taking a rise in production in 2011-12 off the agenda.

And, after all, Argentina has a history of export curbs, such as a ban on beef shipments in 2006.

"These rumours are out there," Don Roose, president of US Commodities, told Agrimoney.com.

Argentina's agriculture secretary did his best to tackle rumour and circumstantial evidence by denying that any such export curbs were on the agenda.

Mr Roose gave him some support. "Argentina raises a lot of tax revenues on its grain exports. So to ban them would be to shoot itself in the foot."

Wheat leads

The result of such speculation and calculation was a rise in crop prices.

But it was

wheat

, of which Russia is a key exporter, which did best. (And indeed, the calculations would make a Russian ban more likely than an Argentine one.)

Chicago's March contract closed up 2.2% at $6.33 ½ a bushel, with the grain adding 1.9% in Kansas to $6.86 a bushel.

In Europe, likely thanks to geography to be a primary gainer of any Russian export retreat, Paris wheat for March closed up 2.1% at a three-week high for a spot contract of E205.75 a tonne.

London's benchmark May lot ended up 1.9% at £163.50 a tonne, the contract's highest finish since September.

'Main bear story'

Chicago corn for March managed a more modest 1.7% rise to $6.30 ½ a bushel.

But then traders have one eye on the increase in sowings higher prices are likely to prompt, with historically huge US figures of 97m acres and above being talked about.

"New crop corn has struggled to move far from the $5.50 support area as acre reports continue to see increased planting projections," US Commodities said.

"This is the main bear story moving forward."

And soybeans for March notched up only a 0.2% rise to $12.20 a bushel.

'Light rains turned heavier'

But then the oilseed could yet, in Argentina, still achieve a marked recovery if rains come. As they did, belatedly, on Monday.

"Yesterday's light rains across Argentina turned heavier overnight with areas that received only light precipitation now seeing best rains since November," Benson Quinn Commodities said.

"Amounts across the drier areas of northern Buenos Aires, southern Santa Fe and western Cordoba saw rainfall amounts of 1-2 inches and coverage was good across 75 to 80% of the crop areas."

Furthermore, weather models "have turned wetter in the six-to-10-day outlooks, with another good system noted for early next week", although not all commentators agreed with this observation.

Weather service WxRisk.com said that the midday GFS model "does not show any significant changes over the next five days as it shows all of Argentina and Paraguay as well as south eastern Brazil to be dry and with increasingly hot temperatures."

Whole a cold front is still on its way around this weekend, "the cold front falls apart as soon as reaches south central Argentina so the front really only gets some showers and storms into far southern portions of Cordoba and Santa Fe".

Bouncing bean

Such talk overshadowed

cocoa's

day in the sun on soft commodity markets, as the chocolate ingredient soared on one of the rounds of short-covering that has supported a revival in prices from multi-year lows reached in early December.

London cocoa for March soared 7.0% for March delivery to close at £1,584 a tonne, the best finish for a spot contract more than two months.

New York's March cocoa contract added 6.4% to $2,413 a tonne, also the highest close since the first half of November.

Various reasons were cited for the rally, including a Reuters poll showing average expectations of a 100,000-tonne deficit in world production in 2011-12, when a surplus had been expected earlier in the season.

Investors in London will also, from Wednesday, face higher margin calls on cocoa contracts (but lower ones for coffee, wheat and white sugar), although holders of short positions had already proven quicker than their New York peers to close up.

By Agrimoney.com

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