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Evening markets: rains douse soy rally. But corn stands firm

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The prospect of a key crop report was billed likely to protect crop prices from too much movement on Wednesday.

But that didn't work for

soybeans

, which recorded their worst performance of 2012.

OK, broader market conditions did not help, with a risk-off feel creeping in, stoked by a warning from Fitch that the euro could collapse if the European Central Bank did not more actively buy up eurozone government bonds.

Shares eased on both sides of the Atlantic, while the

dollar

gained 0.7% against a basket of currencies, making dollar denominated assets less competitive as exports, and turning the default move in raw materials to a negative one.

In fact, the CRB commodities index lost 0.6%.

'Heavy rainfall verified'

But soybeans outpaced that in style, tumbling 2.5% to $12.03 a bushel for March, falling with the rain which dropped on Argentina with greater generosity than some had forecast.

"Rains in Argentina overnight are coming in with generally stronger-than-expected amounts and the soybean market is reflecting that reality," Darrell Holaday at Country Futures said.

At Martell Crop Projections, Gail Martell said that "heavy rainfall has been verified in the Argentina central grain belt", with radar maps appearing to show two-to-four inches in Cordoba, Santa Fe and northern Buenos Aires, "key

corn

and soybean provinces".

The rain is more crucial to soybeans than corn as the latter has already gone through its sensitive pollination period, in uncomfortable heat, while crops of the oilseed are more salvageable.

'Huge drop'

Indeed, in corn, estimates of production losses in Argentina "are now as high as 8m tonnes out of a 29m-tonne crop", broker US Commodities noted. "A 28% drop in production is huge."

Which helped keep losses in the grain itself to 0.5 cents, for Chicago's March contract, which ended at $6.51 ½ a bushel.

Besides, traders are expecting Thursday' big crop report, the US Department of Agriculture's monthly Wasde briefing on world crop supply and demand, to be a bullish one for corn, with a cut predicted for the 2011 US crop, besides the forthcoming South American one.

The US harvest figure is seen being trimmed by some 45m bushels to 12.265bn bushels, with stocks at the close of 2011-12 seen downgraded nearly 100m bushels to 749m bushels.

For soybeans, the market is forecast a slight uptick, to 233m bushels, in the end-stocks number, with potentially a bigger figure if weak exports are given greater weight.

"The recent decline in shipments could give a 30m-40m bushel reduction" in the USDA forecast for American soybean exports, Paul Georgy at broker Allendale said.

'Irreversible damage'

In

wheat

, meanwhile, the world stocks estimate "could jump on increases in former Soviet Union and Argentina production", Mr Georgy said, an opinion which was not wholly echoed elsewhere, with further poor news for Ukraine wheat.

Ukraine's 2012 wheat harvest could fall to 12m tonnes this year, from 22.4m tonnes in 2011, thanks to the poor start a dry autumn has given to winter-sown crop.

"Historic drought has caused irreversible damage in wheat heavily produced in the southern portions of the country," Martell Crop Projections said.

"Ukraine cumulative rainfall July 1 2011 – January 1 2012, has averaged only 60mm, compared to 150mm normally," the forecaster said.

"Kryvyi Rih on southern Ukraine received only 46mm against 240mm typically, and just 11% of normal."

Chicago wheat ended up 0.2% at $6.41 a bushel, recovering a little of its historically-unusual discount against corn.

'Worried about availability'

Many soft commodities could boast better performances, including raw

sugar

, which ended up 1.6% at 23.69 cents a pound in New York, for March delivery – even if only thanks to the annual fund rebalancing exercise, which sees them buy laggards to bring weightings back to base levels.

"All that is keeping the raws afloat is the index fund reweighting, now on its third day and expected to end this week," Nick Penney at Sucden Financial said.

For white sugar, which gained 1.1% to $618.00 a tonne in London, there may be a little more substance to headway.

"It seems that traders are worried about availability of deliverable whites and are seeing an increase in off-take," Mr Penney said.

"Much of it has gone to East Africa and to Iraq and much of it in containers, which has 'slipped under the radar'.

"Thai whites and Guatemalan sugars are trading a healthy premium to the tape, and with any EU deliveries requiring export licences… it seems futures is converging with the higher priced physicals."

Quadruple fillip

Cocoa

added to gains too, if by a less spectacular 0.7% this time in New York for the March lot, which ended at $2,350 a tonne.

"Index adjustments have probably resulted in higher demand for futures contracts, cocoa having underperformed last year by a good 30%," Commerzbank said, also noting the impact of a strike in Nigeria, a major cocoa producing country, industrial action which is hampering crop transport.

Furthermore, "dry weather and strong winds" in Ivory Coast, the top producer, are stoking output concerns, while analysts are on Friday forecasting strong European cocoa grind data.

"This news is likely to have prompted many investors to have closed speculative short positions," the bank added.

Juice squeezed

However,

orange juice

, another strong gainer in the last two sessions, got vertigo after prices rose in the last session to a record high.

New York's March contract, in its first day as the spot lot, ended 9.5% lower at 19.65 cents a pound, touching limit down at one point.

The contract had risen the exchange limit on both Monday and Tuesday, spurred by fears for a Florida freeze, and curbs on imports from Brazil caused by a fungicide tainting scare.

By Agrimoney.com

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