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Evening markets: grains rise on nerves ahead of US report

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There is a large chunk of observers who believe that the key agricultural commodities report out on Wednesday will be a damp squib.

One analyst described the US Department of Agriculture's monthly Wasde briefing as likely to prove a "yawner", while GrainAnalyst trader Matthew Pierce said he did "not expect many fireworks".

"Look for the report to be a relative dud," he added. And it's easy to see why, so late in the season, without too many crop surprises over the last month.

But many investors were not willing to bet on the USDA coming up with anodyne data, even this late in the season.

Chicago

corn

closed up 1.2% at $6.60 ½ a bushel for December delivery, the best finish since late September, with Chicago

wheat

for December soaring 2.9% to $6.57 a bushel, its highest close for nearly a month.

The buying was "primarily tied to short covering ahead of the USDA numbers tomorrow", Darrell Holaday at Country Futures said.

Ciao, Silvio?

Of course, solid external markets were a help.

Wall Street

stocks

stood 0.5% higher in late deals, helped ironically by ideas that Silvio Berlusconi will step down as Italy's prime minister, paving the way for a more dynamic anti-debt crusader.

These rumours gathered strength even after the close of agricultural commodity markets, strengthening the euro and deepening a decline in the

dollar

, which lost 0.5% against a basket of currencies.

The

Vix

volatility index, the so-called "gauge of fear", fell decisively below 30 points, so among its lower levels of the last three months.

'Aggressive cash buyers'

But there was bounce in the grains market anyway to help higher closes, with fast money reluctant to take out fresh short positions on corn.

"Speculators show little interest in selling a lower corn board as already light producer cash movement is expected slow even further as harvest comes to completion," Benson Quinn Commodities said.

"Domestic end users remain aggressive cash buyers as profit margins in ethanol are historically high and margins on fed cattle remain profitable."

According to Mr Pierce, margins for corn ethanol manufacturers are at their highest since 2006.

US Commodities tempered demand enthusiasm somewhat, saying that while "feeding margins and ethanol demand remains large for corn, export demand remains slow", at 248m bushels so far in 2011-12, down 23% year on year.

Game of two halves

Strong corn was one support for Chicago wheat, which remains at an unusual discount to corn.

But so was the mixed nature of the rain which has been reaching the southern US Plains, where seedlings have struggled against drought, and is set to drop more moisture.

Rains over the eastern halves of Oklahoma and Kansas, the top US wheat producing state, "will help tremendously, while the western third of Kansas and Oklahoma as well as most of Texas miss out on beneficial rains", Mr Pierce said.

"Overall a good start in the eastern regions but that is not where they grow the high protein wheat in Kansas," and with dyness set to follow the forthcoming system.

Kansas hard red winter wheat for December added 1.9% to $7.38 ½ a bushel.

Paris jump

Minneapolis hard red spring wheat too gained 1.9% to $9.46 ¼ a bushel for the December, with the USDA seen set on Wednesday to trim estimates for US spring wheat acres this year, following a resurvey of northern states.

However, Paris wheat eclipsed them all, soaring 3.4% to E202.75 a tonne for November delivery, ending above E200 a tonne for the first time since September.

Like Chicago, short-covering was seen as behind the move, which did occur in healthy volumes.

But it was not repeated in later contracts. The best-traded March lot added 0.1% to E184.50 a tonne.

London wheat for May edged up 0.2% to £155.25 a tonne.

'Dire need of a supportive story'

Back in Chicago,

soybeans

gained, only to prove less capable of closing near day highs, like the grains, amid continuing high expectations at the South American harvest.

Brazil is now 54% planted, compared with 12% a year ago, and up 13 points on the five year average, with the important growing state of Mato Grosso 75% sown.

"This should equate to higher yields," US Commodities said.

Rival broker Benson Quinn said: "The soybean market is in dire need of a supportive story. A once promising technical picture would be damaged considerably by a trade below $11.90 a bushel in the January contract."

The lot actually ended at $12.05 a bushel, up 0.5%, but 1% off its high.

Mixed softs

In New York,

cotton

did better, rebounding 0.9% from a 14-month closing low to 97.62 cents a pound for December delivery on a bounce attributed to technical factors, with bearish investors seen unwilling to try further downward pressure ahead of the Wasde.

But raw

sugar

did better still, soaring 2.3% to 25.91 cents a pound for March on persistent ideas of China and Malaysia loitering with intent to purchase

"The trade is eyeing possible sugar purchases by Malaysia to fill the country's mid-term demands, which could boost a sluggish physical market in Asia," Lynette Tan at Phillip Futures said.

Expectations from Associated British Foods of firm sugar prices ahead hardly hurt sentiment.

But

coffee

for December lost early gains to close down 1.5% at 229.60 cents a pound, hurt by data showing a recovery in certified stocks in New York to deliver against contracts, and a 10.7% dip to 2.85m bags in Brazilian exports of green coffee last month.

By Agrimoney.com

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