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Evening markets: soybeans resist bears' return

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Crops lost their polish in later trade as, with funds drawing in their horns, the dollar, which they have managed to ignore for three days, came back into focus.

The greenback pinned back the euro to $1.4800 at one stage, and forced sterling below $1.65, as investors cut exposure to risky assets ahead of a week which will, in the US, be interrupted by Thanksgiving celebrations.

A stronger dollar, which makes crops less competitive on export markets, was also credited to fears of a default by Ukraine of sovereign debt, after the state railway failed to repay part of a $550m syndicated loan.

Soybeans retained some support, given the huge demand from foreign, mainly Chinese buyers, whatever the dollar. More than 70% of US soybean exports forecast by Washington for the year to the end of next August have been completed or are in the pipeline.

Chicago's January contract closed up 7 cents at 10.46 a bushel in late deals.

Funds vs fundamentals

But the grains were soft, especially corn, which fell 4 cents to $3.91 a bushel.

Here export sales are not so rosy, continuing "to disappoint even the most meagre expectations", in the words of Allendale, the US broker.

There was talk in late trade of funds selling 3,000 corn lots.

Of wheat, they sold 2,000 contracts, helping the December lot down 2.75 cents lower to $5.59 ¾ a bushel, although some brokers believe the grain deserves more.

"It is obvious that fund speculative buying of the last three weeks has forced the market $1 per bushel higher," Allendalle said.

"The rally was not based on real demand. In fact, the rally is actually hurting demand and some within the industry are getting concerned."

Vic Lespinasse at chipped in: "Wheat is still lower and justifiably so as US wheat is way overpriced versus the rest of the world."

Happy New Year?

The theme was picked up across the Atlantic too, where Hugh Schryver at the UK grain arm of Glencore, noted a difference between the 2008 price spike, which was supported by tighter crop supplies, and the current rally.

"This time, certainly as far as the wheat is concerned, the fundamentals would seem to contradict the fund managers' views," he said.

Wheat, after all, is in abundance, even if Australia's crop looks likely to come in 1m tonnes likely than previously forecast, as ProFarmer said on Friday.

"To make matters even more difficult, it seems some speculators are now buying wheat futures in anticipation of another hike at New Year," he added.

Still, London wheat barely budged despite sterling's helping, closing up £0.10 at £106.75 a tonne for January.

Paris wheat actually fell, ending down E0.50 at E133.00 for the same month.

Cocoa sweetens

Apart from soybeans, the other bright spot was cocoa, which closed sharply up both in London – adding £76 to £2,174 a tonne for March – and New York, where the March lot settled up $102 at 3,299 a tonne.

Some short-covering, ahead of Thanksgiving week, was seen as one reason behind the move, with many investors having bet on cocoa tumbling from its highs.

Other softs ended lower – even orange juice, which for once followed the herd, closing down 1.30 cents at $1.1265 a pound.


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