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Evening markets: sugar and wheat soar. Corn and soy wallow

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Thursday did not quite live up to potential on financial markets, given the upbeat headlines for the two main causes of the macro-economic worries.

In the US, the second quarter GDP estimate was upgraded, by 0.3 points to 1.3%, while weekly new claims for jobless benefit fell 400,000 to their lowest since April.

In the eurozone, the German parliament approved of the expansion of the bail-out fund for debt-stricken countries.

But some optimism faded after a weak auction of Italian government bonds sent 10-year paper at one point to 5.86%, the highest since the eurozone was created.

By late deals in New York, Wall Street

shares

were flirting with a negative close and the

dollar

rebounded to stand 0.2% higher, weakening the export competitiveness of dollar-denominated assets including many commodities.

Up through the lines

It wasn't enough to throw raw

sugar

off its stride, with New York's October contract jumping 4.6% to 27.06 cents a pound, and the better-traded March lot soaring 6.5% to 25.95 cents a pound, recovering $0.40 cents of discount.

The surge was attributed to evidence of end user buying from Africa and the Middle East on the recent break, and to technical factors.

While December

corn

, for instance, has scared many chart watchers by falling both through its 100-day and 200-day moving averages, much-watched technical indicators, over the past 10 days or so, sugar bounced up through both in one day.

That helped keep sugar bears at bay, despite, as Thomas Kujawa at Sucden Financial noted, "a less optimistic view for prices in the near-to-medium term with Russia's fantastic beet crop being mentioned and seemingly good prospects from India and Thailand".

'Relentless pressure'

However, some of the grains found the going harder, with some specific factors concerning traders too.

The row crops have harvest pressure to factor in, sparking the once-a-year rise in supplies which weighs on prices – especially when yields may not be as bad as have been feared.

"Harvest yield reports for corn and

soybeans

continue to be reported as better-than-expected," Benson Quinn Commodities said, while adding that yields were "wildly variable due to delayed nature of spring planting".

Besides, dry weather forecasts indicate good combining conditions and that "harvest pressure will be relentless through the next week", Darrell Holaday at Country Futures said.

And then there was the date to factor in. Friday will bring not just the end of the month, a period when funds typically close positions, and quarter, even more so, but US Department of Agriculture grain stocks data, besides wheat production estimates, which have investors on edge.

"The market will have a hard time doing anything positive ahead of month end and the report so do not get overly excited about any rally or further decline," GrainAnalyst trader Matthew Pierce advised earlier in the trading day.

"There is still plenty of risk to the downside due to money flow and possible redemptions."

'Exports were impressive'

Still, soybeans managed to shake-off the blues with the help of surprisingly strong US weekly export data, of 1.0m tonnes, seen as especially upbeat as China, the top importer, had taken a big share, of 845,600 tonnes.

"Exports were impressive for soybeans," Benson Quinn Commodities said.

There were rumours of another two-to-three cargos sold to China overnight too.

Chicago's November lot added 0.5% to $12.30 a bushel, recovering from a 2011 low of $12.09 ¼ a bushel hit earlier.

Export data were not so strong for corn, at 788,000 tonnes, towards the lower end of market expectations. December corn added 0.3% to $6.34 a bushel.

'No sign of rain'

And they were weakest of all for wheat, at 429,820 tonnes, below market estimates.

Still, wheat had a clutch of things in its favour. The first is the lack of rain, in the US hard red winter wheat areas, but parts of Europe and the former Soviet Union too, just as farmers are trying to get grains planted.

"There are no signs of any help in the drought areas of the southern Plains. Also no sign of rain in the forecast in Ukraine," Mr Holaday said.

The second was the concerns over spring wheat supplies - not just from the perspective of farmer hoarding, but the idea that Friday's wheat production data may show a smaller crop than had been thought.

"We have not had a fresh number since August, which gives a bit of scope for change since then," Jerry Gidel at North America Risk Management Services said.

"A lot of people are expecting the acre figure to come down."

'Money in the bank'

And then there was the technical factor that Chicago wheat is one contract in which speculators have a large short, meaning that position closing means buying and driving the price higher.

"People are taking a bit of profit, putting money in the bank," Mr Gidel said.

Chicago wheat for December ended 2.4% higher at $6.54 ¼ a bushel – a premium of more than 20 cents over corn – while Minneapolis spring wheat for the same month soared 4.0% to $8.95 ½ a bushel.

'Graphic numbers'

New York

cotton

was strong too, closing up 2.7% at 102.22 cents a pound for December, helped by bumper export sales of 222,600 running bales – mainly to China, the top importer.

"Today's export sales numbers were graphic concerning demand beneath 100 cents a pound," veteran Louisiana-based trader Mike Stevens said.

"Speculators became acutely aware of last week's business done in the $1 area."

Besides, technically, the contract's inability to spark follow-through buying on falling through the 100-cent mark earlier in the week "was a signal for traders to try the other side once again".

"Three closes below 100 cents a pound didn't make a lot of headway."

By Agrimoney.com

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