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Evening markets: soybeans, sugar buck negative trend in ags

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Sometimes silence speaks volumes

"Traders will be watching for any more export sales announcements by the US Department of Agriculture at 8:00am," Paul Georgy said ahead of the start of live trading in Chicago.

After all, there has been talk of big US

corn

sales – potentially 800,000 tonnes - to China in recent days, of which only 240,000 tonnes had been (kind of) confirmed.

But the hour came and went without any more news of deals, nor of

soybeans

either.

Macro pressures

That was one reason for Chicago grain investors to justify a more downbeat mindset.

But it was not the only one. In truth, many commodities struggled after Chinese Wen Jiabao ruled out going easy to help out the country's overheating housing market, a pronouncement blamed for a drop of more than 2% in Shanghai shares.

Furthermore, the

dollar

gained 0.5%, after a US central bank statement late on Tuesday was viewed as cutting hopes for further ultra-easy monetary policy, which would weaken the currency.

A stronger dollar weakens the export competitiveness of dollar-denominated exports including many commodities.

'Negative vibe'

"The outside markets are offering a negative vibe as the dollar continues the rally triggered yesterday afternoon and crude oil is trading a little lower," Benson Quinn Commodities said.

The average raw material, as measured by the CRB index, fell by 0.9%. New York

copper

lost 1.4%, while Brent

crude

shed 1.0%.

Cotton

, which has been supported largely by buying by China, the top importer, fell 1.0% to 87.14 cents a pound for May delivery, the lowest close for a spot contract in 2012, and finally busting in earnest below the 88-cent mark, which had provided a price floor.

Corn had the extra downer too of data showing US ethanol production tumbling last week to a five-month low of 892,000 barrels a day, a drop of 14,000 barrels a day from the previous week.

"Corn ethanol margins are negative," US Commodities said, if adding that "blenders are still securing ethanol for the summer driving season", when fuel demand spikes.

Wheat weather

Against that background, the grain could be considered to have ended a modest 0.3% lower at $6.58 ¾ a bushel for May delivery.

Still, at Mr Georgy noted, a forthcoming USDA report on domestic grain inventories "is providing buying enthusiasm as many are expecting a large reduction in corn stocks".

Not so for

wheat

, which fell more in line with other commodities, dropping 0.8% in Chicago to $6.43 ¾ a bushel for May delivery, as investors weighed up positive and negative weather factors.

"The models for US weather are bearish," Darrell Holaday at Country Futures said.

"But the dry conditions in Europe still persist in the weather models and that is providing support to wheat."

US vs EU

Indeed, in Europe itself, London wheat ended 0.9% higher at £170.50 a tonne for May delivery, with Paris wheat's losses limited to 0.4%, leaving the May contract at E210.75 a tonne.

How that reflects in export competitiveness we will know more tomorrow, with Egypt, the top wheat importer, after the market's close revealing its latest tender for the grain.

Currently, US soft red winter wheat, the winner of recent Egyptian tenders "is at the Gulf trading at a $10-a-tonne discount to the Black Sea wheat", a price benchmark, US Commodities noted.

Strong crush

It was left to

soybeans

to spare bulls' blushes in Chicago by adding 0.1% for the May contract to close at $13.50 ¼ a bushel.

While there was plenty of comment over an apparently "overbought" commodity, and the close did leave the contract short of the $13.55 ½ a bushel which as Agrimoney.com noted earlier is seen as a key technical objective, soybeans did have a few aces to play.

For one, prices rose again on China overnight, enhancing the case for Chinese buyers to turn to US supplies.

"Chinese soybeans are now trading at their highest levels since September. This is when US soybeans were in the mid-$14-a-bushel territory," US Commodities said.

Then there were industry data on the US soybean crush last month which, at 136.35m bushels, came in above the forecast range of 132m-134m bushels.

'Treat with caution'

Back in New York,

cocoa

continued to suffer from a forecast from officials in Ghana, the second-ranked producer, on Tuesday of a crop to rival last year's record 1m-tonne harvest.

The May contract closed down 2.5% at $2,314 a tonne.

There are doubts about this forecast, as expressed by Commerzbank, which flagged the contrast of Ghana's apparently bumper crop with that in neighbouring Ivory Coast.

The forecast "contrasts sharply with the situation in neighbouring Ivory Coast, where dry and windy weather has resulted in crop shortfalls and pessimistic outlooks for the remainder of the season", the bank said.

"Ghanaian cocoa production could also have been artificially increased by the smuggling of cocoa beans from Ivory Coast.

"The optimistic appraisal of the Ghana Cocoa Board should therefore be viewed with caution."

'Supportive factor'

Coffee

fell too, by 2.6% to 182.90 cents a pound for New York's best-traded May contract, the lowest finish for a nearest-but-one contract since October 2010.

"Brazilian selling ahead of the coming harvest has encouraged fund selling," Rabobank noted, flagging a huge increase in speculators' net short position in the bean.

However, New York raw

sugar

bucked the trend, adding 1.3% to 24.44 cents a pound for May delivery.

"The market is focused on the coming Centre South Brazil crush, and recent reports are suggesting lower output," Rabobank said, Centre South Brazil being top producing region in the top producing country.

"Given the months of weather still to come," besides currency shifts and the equations over whether cane will be used to make sugar or ethanol, "uncertainly will remain a supportive factor until well into the crush".

By Agrimoney.com

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