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Evening markets: harvest time and Greece sap grains' resolve

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Normal service was resumed in farm commodity markets, in the end.

Crops' early and tentative effort to make headway gave way to another wave of selling as the mood on external markets turned negative, again.

Sure, there was some positive macroeconomic news around, with China's premier, Wen Jiabao, saying that China had inflation under control, while the US edged its estimate for economic growth in the first quarter 0.1 points higher to an annual rate of 1.9%.

However, further weakness of the euro, and strength in the

dollar

was a sign that investors have not got over their fears for Greek, and indeed world, prospects.

'Hot rumours'

Wall Street shares stood 1.0% lower in late deals, with Brent

crude

hitting a four-month low below $104 a barrel before recovering some ground.

And, with risk assets so out of favour, agricultural commodity markets struggled too despite having bullish news to point to.

China showed up buying 120,000 tonnes of new crop US

soybeans

, and was believed, again, to have bought

corn

too.

"Rumours also are hot that China has purchased corn," US Commodities said.

"It is now profitable for China to import US corn. If they want it, it works at least for a few days."

Reports ahead

Then there was the prospect of the US grain inventories and sowings reports next week which are being given a bullish run in.

"We have stated several times that the only way one can be bearish the [inventories] report is if one believes USDA understated the March 1 corn stocks at 6.522bn bushels," Darrell Holaday at Country Futures said.

On the plantings report, "the consensus that corn acres will be lower than 90m acres continues to grow", Benson Quinn Commodities said.

And some weather fears remain too, with forecasts showing that southern US states "will continue to bake", Mr Holaday said.

Cotton's thread

That's bad news for yield prospects for many crops, including

cotton

, which jumped 2.1% at 121.92 cents a pound in New York for the new crop December lot.

And while the old crop July contract managed only a 0.4% gain, to 165.22 cents a pound, held back by talk of Indian export prices undercutting New York futures for the first time this year, it still achieved a remarkable record of gaining every day this week, even while prices of other crops have tumbled.

Indeed, Friday's closing prices were negative for grains investors again by the close, with corn for July down 1.5% at $6.70 a bushel, while

wheat

tumbled 2.0% to $6.35 ¾ a bushel, reinflating its atypical discount to corn, which is now nearly three weeks old.

Caution first, for which read selling, was the byword for investors with so much uncertainty afoot, especially ahead of a weekend.

'Consumers in no hurry'

To be sure, there were fundamental reasons to be downbeat too, notably pressure from the wheat harvest, which in boosting supplies tends to swing power to buyers and undermine prices.

In wheat, "consumers are in absolutely no hurry to make any purchases. Why should they when harvest is about to start?" the UK grain arm of a major commodities house said.

And especially when Russia has stacks to sell.

London wheat has faced the extra pressure of estimates of a strong barley crop in Spain, meaning the UK's biggest feed grain market won't be wanting to much next season.

"With Spain's livestock industry beset with low prices and therefore in decline, their feed grain import requirement will be much reduced," the grain merchant said.

London wheat for November ended down 0.1% at £163.50 a tonne, spared further damage by closing before a weak finish in Chicago, a factor which, coupled with the weaker euro, helped Paris November wheat end 0.2% higher at E195.75 a tonne.

Back in Chicago, soybeans scraped out a positive close too, helped by the China order, adding 0.2% to $13.20 ¼ a bushel for July delivery, although the new crop November lot eased 0.6% to $13.09 ¼ a bushel.

'Move higher may be sustainable'

Among soft commodities,

sugar

ended on a weak note, down 0.2% at 27.54 cents a pound in New York for July, in line with the general mood, with

cocoa

for July finishing down 0.9% at $2,958 a tonne.

However,

coffee

escaped, adding 0.5% to 249.00 cents a pound in New York for July arabicas, with investors reluctant to sell down further given the prospect of another world deficit in 2011-12.

"I think plenty of opportunities lie ahead in coffee," Jurgens Bauer at PitGuru said, noting futures' improved grip on upward momentum.

"Feels like a move higher may be sustainable, but pace will be slower and more of a grind."

And arabica's resilience fostered thoughts over the deeper discount that London robusta beans have achieved, hitting a four-month low in the last session. The July contract regained 4.5% to finish at $2,282 a tonne.

By Agrimoney.com

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