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Evening markets: rocketing corn leads leap in grain prices

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It's always canny to keep a few surprises to the end. Which is what grains did, ending the first quarter of 2011 with quite a fireworks display.

What, with wheat rocketing 5% in Chicago, beating corn's 4.5% only because that was the maximum the grain was allowed by exchange rules.

Corn in fact looks set to add the same in the next session, if signals from the options market are anything to go by. That would put it within a step of the two-year high reached at the start of the month.

Cotton disappointment

What lit the powder were two US Department of Agriculture reports which the market had been wary of – on US sowings intentions for 2011-12, and grain stocks as of the start of March.

In fact, the sowings report, while the one longest anticipated, was less inflammatory. It held a surprise for

cotton

, estimating plantings at 12.57m acres, a big jump on last year's seedings, but nonetheless some 640,000 acres short of the figure that the market had expected.

After all, record prices have seen expanding plantings expectations for other major producers, such as China, India and Pakistan.

New York cotton for December, the first new crop lot, soared the exchange maximum of 7.0 cents to 132.50 cents a pound.

The benchmark May lot added 3.4% to 200.67 cents a pound, taking its gains for the quarter to 38%, and confirming its status as the best-performing commodity so far this year.

Big yield needed

Soybeans

, too, got a boost from a seedings estimate of 76.6m acres, below last year's and market forecasts.

"It will now take a very big yield to keep soybean stocks from going negative, unless we ration demand with a substantially higher price," Darren Dohme at Powerline Group said.

"China need these imports. They will just have to rush in and secure them before values run to much higher. China will first burn through the South American crop then finish eating ours."

The oilseed ended 2.8% higher at $14.10 ¼ a bushel for May delivery, while the new crop November lot added 2.3% to $13.95 a bushel.

'Most bullish scenario'

But the real incendiary device was the quarterly US inventories report.

These have been gaining a reputation for surprises. And the data as of March 1 did not disappoint, showing soybean stocks 50m bushels lower than expected, but

corn

170m bushels below.

"The corn stocks number was the most bullish scenario that could have been released," Darrell Holaday at Country Futures said,

Rationing will have to kick in. "And rationing occurs when you get prices high enough that some sector is losing substantial money using it and must stop," Mr Holaday said.

"We are not even close yet. We still today cannot name a sector that will ration at the higher price levels," given high prices that those that use corn to produce ethanol, beef or pork can achieve.

Corn for May rose the maximum $0.30 to close at $6.93 ¼ a bushel, with the new crop December lot gaining the same to $6.25 ¼ a bushel.

So high?

And where corn went,

wheat

followed, tied by their certain interchangeability for many uses, such as feed, even if the reports for wheat were deemed a bit bearish.

Wheat stocks were higher than the market had forecast, and it picked up a stack of the acres missing from other crops too.

"The surprise comes in spring wheat area, which is estimated up 5% to 14.4m acres," Alex Bos at Macquarie in London said.

"We find it surprising that spring wheat acreage would expand so sharply in a context where expected corn and soybean returns are much stronger in the northern Midwest region."

Others pointed to the risks to a high spring wheat number when sowings in key areas look likely to be disrupted by flooding following hefty winter snows.

US vs EU

Still, wheat for May rose 5.0% to $7.63 ¼ a bushel in Chicago and 5.3% to $9.08 a bushel in Kansas.

Minneapolis, the home of US spring wheat trading, lagged, but not so much as you would really notice, ending 4.3% higher at $9.23 ¾ a bushel for May.

European contract rose too, although cautiously, given a stronger euro and for fear that the bearish side of the US wheat data would eventually come to play. And despite firm EU weekly wheat export data, of 480,000 tonnes, too.

Paris wheat for May ended 1.5% higher at E240.00 a tonne, while London's equivalent closed up the same at £202.00 a tonne.

Indian exports in doubt - again?

Among soft commodities, further headway by forces supporting Ivory Coast's presidential hopeful, Alassane Ouattara, made for another weak day for

cocoa

, which fell 15% to £1,915 a tonne in London, for May delivery, and 1.2% to $2,952 a tonne for the same month in New York.

Sugar

had a bit of an up and down day. The ups reflected talk of factors which would refresh the market squeeze.

"Sources reported EU buying sugar and rumour that the anticipated Indian export of 500,000 tonnes are being held," Jurgens Bauer at PitGuru said.

However, Unica, the Brazilian cane industry association, countered by estimating a small increase in sugar output from the country important Centre South region of 1.1m tonnes to a record 34.6m tonnes.

Raw sugar for May closed 0.4% lower at 27.11 cents a pound in New York.

, which fell 15% to £1,915 a tonne in London, for May delivery, and 1.2% to $2,952 a tonne for the same month in New York.

Sugar had a bit of an up and down day. The ups reflected talk of factors which would refresh the market squeeze.

"Sources reported EU buying sugar and rumour that the anticipated Indian export of 500,000 tonnes are being held," Jurgens Bauer at PitGuru said.

However, Unica, the Brazilian cane industry association, countered by estimating a small increase in sugar output from the country important Centre South region of 1.1m tonnes to a record 34.6m tonnes.

Raw sugar for May closed 0.4% lower at 27.11 cents a pound in New York.

By Agrimoney.com

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