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Evening markets: strong dollar adds to crop headwinds

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So Friday 13th had some sting after all.

Investors hoping for a quiet trading day ahead of a long weekend in the US were disappointed when talk emerged that Standard & Poor's is later to downgrade credit ratings for Austria and France.

That sent the euro tumbling to its lowest levels against the

dollar

since August 2010, and the euro index to its weakest in at least six years.

The dollar, meanwhile, bounced 1.0% against a basket of currencies, reducing the competitiveness of dollar-denominated assets.

Meaning that the big commodity contracts were facing a headwind even before factoring in two other setbacks.

'Deflated sails'

The first of these was Thursday's US Department of Agriculture data pegging domestic stocks of corn, soybeans and wheat as of the end of 2011-12 above market expectations.

"The bearish USDA report yesterday deflated the bulls' sails," US Commodities said.

The second was ideas of further rain in South America.

"The midday forecasts were a little wetter in Argentina and that has put some downward pressure on the soybeans," Darrell Holaday at broker Country Futures said.

Soybeans

, which have yet to reach their most sensitive development period in Argentina, where many second crop beans have indeed yet to be sown, still have time to be rescued significantly from a drought-affected start.

Better for growers

Drew Lerner from World Weather went further.

Further rain forecast for Argentina "suggests Argentina crops will not get back to the same level of distress noted previous to this week's rain.

"Crop conditions will either continue to improve or remain at status quo," he said, while adding that "timely rainfall will still be very important since some crop areas in Argentina are still carrying limited subsoil moisture".

Soybeans for March closed 2.0% lower at $11.58 ¼ a bushel in late deals.

And Mr Holaday reckoned further weakness lies ahead, saying that "yesterday's low of $11.50 a bushel on March soybeans will likely be tested again before next Wednesday".

Huge sowings estimate

Corn

ended 2.0% lower at $5.99 ½ a bushel, its first close below $6 a bushel in nearly a month.

While rain looks too late to rescue South American corn much, the grain did face the setback of a huge estimate, of 97.5m acres, from Farm Bureau for US sowings of the grain this year.

US Commodities said the forecast, while appearing "exaggerated", does "give the impression that planting intentions are expected to be larger than 93m acres".

Chicago

wheat

dipped 0.5% to $6.02 ¼ a bushel - a performance at least resilient enough to regaining the grain a premium over corn - helped by US wheat turning out the cheapest in Egypt's latest wheat tender, if losing out thanks to the higher shipping costs of getting the grain across the Atlantic.

Paris wheat did better, adding 1.6% to E197.00 a tonne for March, helped by French victory in the Egyptian tender, besides the soft euro.

That helped London wheat also avoid losses, closing up 1.0% at £155.15 a tonne for the best-traded May lot.

Softs soften

The strong dollar wrought some damage on soft commodities too, fuelling a 3.7% slump to 225.25 cents a pound in New York

coffee

for March.

The decline was also fostered by an increase in the closely-watched number for inventories at the New York exchange, stocks which many analysts have forecast will have a big impact on price prospects.

Cocoa

for March dropped 2.5% to $2,269 a tonne n New York, weakened by unexpectedly weak data for Europe's cocoa grind as of the last quarter of 2011, which failed to see the usual seasonal uptick failed.

By Agrimoney.com

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