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Evening markets: soybeans star as China 'no show' sinks corn

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Grains seem to be making a virtue of their non-correlation with other risk assets.

The growing reluctance of corn and wheat to move in the same direction as the likes of shares went into overdrive on Friday.

While

shares

rose, by more than 1% in Frankfurt, and the average commodity, as measured by the CRB index, added 0.6%, grains tumbled. So did

sugar

, for that matter, which fell to a fresh 10-month low in New York.

Other agricultural commodities moved with the general market groove, including

soybeans

which reasserted their dominance in style, rising to their best finish since August.

'No confirmation'

The problem for grains was mainly something which did not happen – confirmation of Chinese purchases of corn, over which the median ambition has been gradually rising, nearer to 1m tonnes.

"The pressure in the corn is coming somewhat from the fact that there was no confirmation of by US Department of Agriculture of any Chinese corn purchase is its daily reporting system," Darrell Holaday at Country Futures said.

"This disappointed the trade."

Ideas of China's need for corn were further questioned by talk of negative margins for hog rearing in the country, although this appears yet to have affected soybean imports, and might prompt a government reaction.

FCStone noted talk "that China will increase the state purchases of frozen pork to push prices up to keep farmers profitable".

'Corn acres will get bigger and soybeans lower…

'

Weather forecasts also deterred bulls, in showing that the rains which interrupted crop sowings in some US states this week will be relatively scarce next week.

The Plains will be completely dry, with a little rain in the western Corn Belt, and more generous, but not extreme, precipitation in parts of the eastern Corn Belt and the Delta, according to WxRisk.com.

"The cold front which is moving through the Midwest and the Mississippi Delta regions will not be a serious problem for these areas over the next 24 hours," the weather service added.

Mr Holaday said: "The feeling in the trade is that corn planting will go so well next week that corn acres will get bigger and soybeans lower."

(And longer term, the International Research Institute for Climate has forecast a US summer which looks set not to repeat in most areas the hot weather which sank yields last year.)

New vs old

Indeed, it is not as if analysts are getting too heavy on the disruption caused by this week's rains to plantings, with estimates for Monday's weekly USDA crop progress report expected to show a figure of some 30% of corn sowings completed, which would mean roughly 13m acres completed in a week.

Whatever, investors found little reason to buy corn, and didn't leaving the May lot down 1.4% at $6.12 ½ a bushel, losing more than half its gains of the last session.

The new crop December contract actually did better, as funds reverted to rolling old crop into new.

Even so, with a 0.9% fall, it vastly underperformed new crop November soybeans, which added 1.6% to $13.56 a bushel.

That took the soybean: corn ratio back up to 2.53:1, above the 2.50:1 mark seen as favouring the oilseed over the grain in US farmers' spring sowing plans.

'Bullish push'

The need for soybeans to buy acres off corn was one reason investors to pile into the oilseed anew.

But so was the latest round of downgrades to Argentina soybean harvest estimates, which have only stimulated talk of further downgrades to come.

"The other reality is that there is now talk of additional trimming of the Argentine soybean crop with estimates now down to 42m tonnes," Mr Holaday said.

"This is really supportive to old crop values."

So was speculation of further moves by China, whose appetite for soybeans is undisputed, to ease its monetary policy, which would improve prospects for imports of raw materials.

"This could be a bullish push for commodities if implemented," US Commodities said.

May soybeans closed up 2.4% at $14.46 ¾ a bushel, the best close for a spot contract in seven months, and within five cents or so of the best finish since 2008.

'Fairly dry or completely dry'

Wheat

did have some bullish credentials going for it, including nagging forecasts of heat in the former Soviet Union.

"And as you go further to the east large portions of the central, southern and Volga districts in western Russia, as well as Kazakhstan, will stay either fairly dry or completely dry over the next –seven-to-10 days and temperatures will be turning hotter," WxRisk.com said.

Benson Quinn Commodities named the Ukraine, as well as Europe and north east and central China, as "global hot spots" in terms of weather worries.

And a major European commodities house, with significant agricultural interests in the former Soviet Union, flagged "concerns about hot, dry weather affecting Russia and Kazakhstan", if couching concerns in terms of potential "problems with drilling corn".

Quality issue

FCStone also flagged some potential support for wheat from the demand side, with Iran said to be back looking for the grain, Iraq tender results due to be announced, and "reports that both Algeria and Nigeria very disappointed with Argentine wheat quality and will be back in for US hard red winter wheat".

Still, with corn fading, and wheat not boasting the supply tightness of its fellow grain, Kansas hard red winter wheat fell 1.8% to $6.26 a bushel for May, the lowest finish of the year for a spot contract.

The better-traded July lot dropped 1.7% to $6.35 ½ a bushel.

Chicago wheat tumbled 1.4% to $6.15 3.4 a bushel, with the July contract falling 1.1% to $6.23 a bushel.

European lots fell too, with Paris wheat for May shedding 0.1% to E216.50 a tonne, and the London May contract dropping 1.2% to £176.30 a tonne.

Softs in demand

Gains were not so hard to come by in soft commodities, bar sugar (whose fall to a 10-month low is reported here).

The better broader market mood, with the extra boost of a 0.5% decline in the dollar, helped

cocoa

get over weak North American grind data for the first quarter.

While prices initially weakened on the data, which showed grindings falling 4.0% year on year to 119,022 tonnes, New York's July contract closed up 1.6% at $2,269 a tonne.

And New York July arabica

coffee

rose 1.9% to 178.95 cents a pound, amid talk of further disappointment in output from Colombia, the second-ranked producer of arabica beans.

By Agrimoney.com

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