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Evening markets: return of fund money lifts crop prices

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Has cash had enough of being on the sidelines, and on its way back into commodity markets, agricultural ones included?

US Commodities thinks it has spotted a trend.

"Commodity buying interest is again alive," the US broker said, noting the supportive role of the US central bank pledge on Wednesday to keep interest rates low in luring money from safe havens, such as the

dollar

, which lost a further 0.2% against a basket of currencies.

"New fund buying has emerged. It is the all-in fund buying that is supporting the market."

Cotton frays

Certainly, crops enjoyed widespread, if not spectacular, gains.

OK, apart from

cotton

whose, largely technically inspired, correction was hardly likely to be stopped by US Department of Agriculture data showing weekly export sales of 2011-12 crop of a mere28 running bales.

OK, sales for 2012-13 crop were better, at 31,100 running bales, the best since October in fact.

Still, with chart signals such as double top to worry about, and the lost premium of the March over the May lot, New York's March contract fell 1.4% to finish at 95.59 cents a pound.

And New York

orange juice

for March eased 2.1% to 206.60 cents a pound as investors took profits ahead of the release, expected on Friday, of the result of US government tests on Brazilian supplies for a banned fungicide.

Positive results could mean the removal of large amounts of supplies from the US market, which requires imports to meet demand.

'

Months of dry and windy weather'

But other soft commodities made modest headway, with New York

cocoa

for March adding 1.2% in New York to close at a two-month high of $2,452 a tonne, amid a continued retreat by the bears who drove prices to a multi-year low last month.

"Top grower Ivory Coast has seen months of dry and windy weather hampering growing operations," Lynette Tan, at Singapore-based Phillip Futures, noted.

New York raw

sugar

for March delivery added 0.9% to 24.73 cents a pound,

"Macro factors are helping as the dollar weakens," making dollar-denominated assets more competitive, Nick Penney at Sucden Financial said.

Furthermore, "fundamentals on sugar remain unchanged with the surplus moving further away in the year", and looking further delayed by an announcement from Mexican cane growers that drought had cut sugar production hopes by 200,000 tonnes to 5.1m tonnes.

Corn fades

And Chicago crops showed modest gains too, with soybeans closing up 0.8% at $12.22 ¾ a bushel, apart from two notable exceptions –

corn

and

wheat

.

Corn dropped early gains to succumb to late profit-taking, closing flat at $6.34 ½ a bushel for March, despite US cash markets remaining strong and export sales coming in at 959,000 tonnes, well ahead of market expectations.

Still, with Wednesday's weekly ethanol data showed production softening to 934,000 barrels a day, only 1% higher than last, after the removal of tax perks at the end of last month, and ideas that higher prices will prompt farmers to sell, corn struggled late in the session.

Black Sea hiccups

Indeed, it was a poor match for fellow grain wheat which soared 1.9% to $6.52 ¾ a bushel in Chicago for March delivery, expanding its newly rediscovered premium over corn.

US wheat export sales were also firm, at 604,000 tonnes.

But the main support was further poor news from the Black Sea, where Russian crops, some with little snow cover, are braving temperatures of 0 degrees Fahrenheit or less. Winterkill losses were seen as increasing the chances of threatened export curbs being introduced.

Furthermore, ProAgro lowered the bar to potentially 40m tonnes on estimates for Ukraine's drought-hit grains crop next year, while Egypt revealed that Kazakh wheat bought at tender had failed to make the grade, and been swapped for Russian supplies.

'Shorts are running'

Egypt's state grain buyer, the General Authority for Supply Commodities, Gasc, also revealed it would need some 500,000 tonnes of wheat by the end of 2011-12.

"Look for the US to be much more completive on that business as both the Ukraine and Russia are running into stocks and logistics issues," Intl FCStone's Dublin office said.

And bullish feeling was supported by a rush by investors to close short positions which had looked a decent bet given huge world stocks of the grain.

"Shorts are running for the door. They have covered 20,000 of shorts the last four days," Intl FCStone said.

Inventory downgrade

Wheat gains were witnessed in Europe too, where Paris wheat for March added 0.6% to E204.24 a tonne.

London wheat for May, the best-traded lot, closed 0.8% higher at £165.50 a tonne, getting a further smidgen of support from a cut of 179,000 tonnes, to 2.54m tonnes, in estimates for UK inventories at the close of 2001-12.

By Agrimoney.com

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