Back to the exits.
Farm commodities' new year resilience gave way on Thursday as the
Ideas about index fund buying as part of their reweighting process supporting last year's laggards proved ill founded.
(The annual rebalancing is said to be beginning, or about to, meaning index finds buy last year's poorly-performing commodities, and sell the market leaders, as weightings are brought back to base levels.)
Crops fell, 2011 dogs or not.
"Index funds are expected to increase their long position in sugar as the S&P Agri index is rebalanced," Rabobank said.
"The support has likely encouraged speculator buying and may support further price increases in mid-January. The support however may only result in further origin selling which may quickly erode gains in the second half of the month."
After all, "the fundamental outlook still suggests the 2011-12 marketing year will have a 6m-tonne surplus, the largest since 2006-07 when prices averaged 10.3 cents a pound", the bank noted.
In fact the selling arrived early, taking New York raw sugar for March down 5.3% to 23.13 cents a pound.
London cocoa for March dropped 1.1% to £1,332 a tonne, with its New York equivalent ending 2.3% lower at $2,028 a tonne.
"The cotton market remains supported by concerns about planted area in 2012 and Chinese demand, but prices will fall in the first quarter as the fundamentals of oversupply pressure prices," Rabobank said.
New York cotton for March ended down 1.2% to 94.95 cents a pound.
But then it was hard for dollar-denominated exports to make gains when the greenback itself was so full of beans, soaring more than 1% as eurozone debt fears reignited again.
The euro dropped to its lowest since September 2010 against the dollar, sunk by concerns about Spanish banks' bad loans, the extent to which eurozone clearing banks are relying on the European Central Bank for liquidity, and the deep discount Italy's Unicredit has felt necessary to get its rights issue away.
A stronger dollar makes assets denominated in it, including many raw materials, that much less competitive as exports.
And, indeed, the CRB commodities index sank 1.7% on Thursday.
Investors in grains had tricky judgments to make about South American crops too, whose prospects have been tempered by overly dry and hot conditions.
There was the judgment about how much the weather has actually affected crops. Allendale hacked its forecast for Argentine
Furthermore, two southern Brazilian states, Parana and Rio Grande do Sul, cut their crop estimates (more for corn than
But the Buenos Aires grains exchange struck a more bearish note by predicting that rains forecast ahead would revive crops, and kept a corn sowings estimate unchanged at 3.7m hectares in contrast with the prevailing downgrades.
"We predict an important recuperation of moisture over the next seven-to-14 days thanks to the arrival of a large storm front that will bring showers to the country's agricultural area," the exchange said.
Not that all observers agree.
Drew Lerner at World Weather said that "rain that falls January 9-11 will be sufficient to ease crop stress, but it will come too late to reverse some of the production losses in early corn, sunseed and a few other crops".
However, he concurred with the idea reported by Agrimoney.com on Wednesday that 2011-12 is not yet like the dismal season of 2008-09, saying that "while dryness has been severe but this time around it is not coupled with extended heat".
Then there was the judgment about how much had been factored in, and whether technical factors suggested profit-taking.
"These markets were overbought and due for a correction," Darrell Holaday at Country Futures said.
"This has been a healthy correction and it could easily take the March corn down to the $6.35-a-bushel level," he added.
"We would expect that to hold prior to the January 12 report," being the US Department of Agriculture's latest Wasde crop report.
And even if the gloomy South America crop forecasts are right, Allendale raised the question about how much US prices will benefit.
Unfulfilled demand for corn will switch to feed wheat from the likes of Argentina and Australia, rather than US corn.
Corn for March tumbled 2.3% to $6.43 ½ a bushel, while March soybeans, the other major crop at risk from South American weather, fell 1.7% to $12.09 a bushel.
Holding short positions, of which there are still plenty in Chicago wheat, whose covering has supported prices of late, looked a lot less scary in a falling market.
Matters looked a little better in Europe, whose exports saw the benefit of a more muscly dollar.
Paris wheat for March ended down, but by a relatively benign 1.0% to E193.50 a tonne.
London wheat for May shed 1.1% to £151.00 a tonne.