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Evening markets: 'negative vibe' ravages commodity prices

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Corn and oats managed to find some wreckage to cling to.

But, for most crops, Wednesday brought a sinking experience, in grains, oilseeds and soft commodities, as fears grew for how the boom in natural resources would negotiate the period of tighter economic policy. Or, at least, the end of ultra-cheap money.

"We have a negative vibe in commodity markets, a broad-based physical commodity liquidation wave," Dave Hightower at the Hightower Report said, saying "funds remain negative" on prices of raw materials.

Benson Quinn Commodities chipped in that "the general weaker tone towards commodities continues", with Rabobank not foreseeing any immediate respite, saying "a sell-off in world equity and energy markets will likely weigh on agri markets this week".

The broad-based CRB commodities index added losses of 1.8% to those of nearly 1% in the last session.

Coffee goes cold

Among crops major casualties included


, which as a non-food farm commodity, and so a more discretionary purchase, is more attuned to the economic risks inherent in higher interest rates.

New York's best-traded July contract ended 6.0 cents, the exchange maximum, or 3.8% lower at 151.51 cents a pound, the weakest finish for a nearest-but-one contract since January.

New York


, which had been supported in recent sessions by fund buying, plunged 3.8% to 294.50 cents a pound for July delivery as it lost this support.

"It will take a significant event to sustain coffee at these levels or propel prices higher," James Mound at PitGuru said.

"That means an actual frost in Brazil, or a major crop crisis in another big grower like Vietnam or Indonesia."

'Abundant supplies'

The outlook for sugar prices seemed equally difficult, with Thomas Kujawa at Sucden Financial saying that the "prospects for the bulls are still seemingly worrying".

"It seems their best chance of a rebound will be either weather in Brazil taking a turn for the worse or some unforeseen political event, which doesn't put as much confidence in a fresh [long] position compared with the recent bear news of abundant supplies from Thailand, India et al."

New York,


shed 3.2% to 21.35 cents a pound for the July contract, now in the spot position. Indeed, at an eight-month closing low for the near-term contract.

Tour pressure

In Chicago,


was the worst performer, shedding 2.7% to $7.72 a bushel for July, amid talk that a keynote tour of US hard red winter wheat country was finding yields less bad than many investors had feared.

"The early reports from Wheat Quality Tour in Kansas must be better than some anticipated and that has kept the wheat market on the defensive," Darrell Holaday at Country Futures said.

In Kansas City, hard red winter wheat for July lost 2.4% to $8.67 ¾ a bushel, with Minneapolis spring wheat finding some anchor from poor weather prospects to limit its losses to 1.8%, for a $9.15 ¼-a-bushel finish.

"Minimal planting progress is expected in key spring wheat growing areas," Benson Quinn Commodities said.

Dry UK

Wheat did better on European exchanges, supported by recent dry weather, which the UK, the region's third-ranked wheat producer, has confirmed gave it its hottest April in 352 years meaning, Rabobank said, "below trend yields are appearing likely this season".

Benson Quinn said: "Concerns about the current dry weather pattern in western European Union and the portions of the Black Sea region continue to grow."

Paris wheat for May shed 0.8% to E247.25 a tonne, while the London May contract fell 0.8% to £204.40 a tonne.

'Potential of a black swan event'

But it was Chicago


which was bulls' real refuge among grains, amid thoughts that prospects for US sowings were not looking quite as rosy as had been hoped.

"With a break after May 11 pretty much across the entire Corn Belt, how much can farmers get in by May 15?" Matthew Pierce at PitGuru asked.

"I feel the 60-70% range is probable with the western reaches of the Corn Belt expected to be finished by then while the eastern and far northern regions will lag behind.", looking at the 11-to-15 day forecast, said that a "dry window is looking much smaller" with the outlook "significantly wetter than what the last few model runs have been showing".

"The potential of a black swan event is there."

Ethanol input

On the upside, a group of senators from farm states proposed measures that would ease the phasing out of tax breaks for ethanol production, rather than have the sudden cut-off at the end of this year that many investors are expecting.

And weekly ethanol production figures were, at 875,000 barrels a day, firm, if down 8,000 barrels on the previous week's daily figure.

Corn for July ended up 0.8% at $7.29 ½ a bushel, with the new crop December lot up 0.5% at $6.65 ¼ a bushel.

'Bullish fundamentals'

And indeed, there may be hope of better things to come, with


adding 0.6% to $3.46 a bushel for July.

The grain is regarded as something of a soothsayer among Chicago crops, setting a trend which others then follow (as it did, indeed, when the sector rally started in June last year).

Meanwhile Rabobank said that, after near-term weakness, "we look for continuing bullish fundamentals to re-emerge as a key focus in coming weeks, particularly if adverse weather persists".


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