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Evening markets: soft commodities harden, grains wilt

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Advantage, softs.

Many commodities had a red letter day after the Greek bailout deal, with US-traded assets getting their first chance too to react to China's easing at of the weekend of bank reserve requirements. (US markets were closed on Monday for President's Day.)

Indeed, the

dollar

fell 0.4%, supporting the case for dollar-denominated assets including many raw materials by making them more competitive as exports.

Brazil jitters

The average commodity as measured by the CRB index, added 1.6%, and many soft commodities did even better.

New York raw

sugar

gained 3.0% to 25.35 cents a pound for March delivery, the best finish for a spot contract since November, helped also by supportive comment on prices for now, with Australia & New Zealand Bank, among others, pointing out the uncertainties over Brazil's output this year.

The better-traded May lot gained 2.9% to 24.47 cents a pound.

Cocoa

for May jumped 3.4% to $2,424 a tonne in New York, rising back over its 110-day moving average at $2,410 a tonne, and gained 2.8% to £1,556 a tonne in London.

New York arabica

coffee

extended its rebound too, closing up 1.8% at 206.05 cents a pound for May delivery.

'Lot of pressure on wheat'

But grains didn't find headway so easy, as the agenda switched firmly to the US Department of Agriculture's outlook forum on Thursday and Friday, which is expected to paint a picture of swelling American crop inventories in 2012-13.

"The market has finally become aware of the reality of increased US acreage along with trend line yields in the upcoming crop years will result in a substantial increase US ending stocks," Darrell Holaday at Country Futures said.

"The outlook forum will likely point that out later this week."

Nor was weather so supportive than it has been of late, with rain reaching needy US hard red winter

wheat

areas.

"Increased moisture over the weekend in the southern Plains has put a lot of pressure on the wheat sector," Mr Holaday said.

Speedy harvest

Many dry parts of South America, including central Argentina received rain too, precipitation which US Commodities said "will basically put a big finish on the soybean crop".

Meanwhile, central Brazil has been getting the dry conditions it needs to get cracking with soybean harvesting, of which 35% is now completed in the key producing state of Mato Grosso.

"The productivity of crops in some municipalities in the north of the state has surprised farmers who are collecting up to 60 bags per hectare," FCStone's Brazil division said.

And a harvest running well ahead of last year's "should encourage the planting of a second corn crop in the state", FCStone said.

A quick harvest means fields are freed up within the optimum planting window, giving second-crop corn more chance of getting established before a dry season begins.

'No enthusiasm'

OK, there were signs of demand from importers for all Chicago's big three crops,

corn

,

soybeans

and wheat.

Algeria tendered for 125,000 tonnes of wheat, after Ethiopia bought 35,000 tonnes of Russian grain, and Saudi Arabia at the weekend purchased 330,000 tonnes, from countries including the US.

And the USDA, through its daily reporting system, unveiled a US export sale of 110,744 tonnes of corn to "unknown" destination.

Still, "there has not been the enthusiasm regarding US exports in the corn and wheat market that we have seen in the soybean complex", Mr Holaday said.

More exports

Indeed, while wheat for March ended down 1.7% at $6.33 a bushel in Chicago, and March corn lost 1.9% to $6.29 ½ a bushel, it was only soybeans which, again, seemed cheered by export news.

The USDA unveiled the sale of 250,000 tonnes of soybeans to China, whose total orders from the US over the past week were lifted near to 3.2m tonnes.

"Soybeans are finding support from continued Chinese buying," US Commodities said.

And at the University of Illinois, farm economist Darrel Good said the pace of US export activity was such that US soybean shipments for 2011-12 "are expected to exceed current projections", from observers including the USDA.

The oilseed ended up 0.3% at $12.71 a bushel for March delivery, and up 0.25 cents a bushel, at $12.62 ¼ a bushel, for the new crop November lot.

The November contract is continuing to boost its appeal to farmers drawing up sowing plans, increasing its ratio over new crop December corn to 2.24, from levels below 2 reached last year.

Stronger euro

A similar pattern was seen in Paris, where a strong euro added to pressure on crop futures.

The main oilseed,

rapeseed

, fared relatively well, closing down E0.25 at E457.25 a tonne for May delivery, while Paris wheat for March slumped 2.4% to E211.75 a tonne.

The better-traded May contract fell even more, by 2.8% to E205.50 a tonne.

London wheat for May fared relatively well, closing down 1.1% at £166.50 a tonne, helped by a soft pound, which lost ground even against the dollar.

By Agrimoney.com

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