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Evening markets: sugar sweetens while crops sour

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The funds never showed up in Chicago on Wednesday. But the selling pressure many had feared following a weak close to the last session did. And this while, in London, sugar was driven to a fresh record high.

Sure, the stronger dollar didn't provide a supportive background, making them more expensive to foreign buyers and cutting wheat's chance, in particular, of regaining traction in exports.

Against the euro, the dollar pushed back nearer to $1.50 at 20:00 GMT.

Weaker oil, off 1.7% didn't help either, reducing any thoughts of support from crops via their use in biofuels.

'Never showed up'

But the real problem in Chicago was the dearth of fund buying. After November's huge early rally, Traders had dolled up for a repeat at the start of this month.

Two days into December, and the funds have yet to show up with open cheque books.

Indeed, they were sellers of an estimated 2,000 wheat and soyoil contracts, 3,000 soybean contracts and 5,000 corn lots with more than an hour to go in Chicago's trading day.

"Fund buying never showed up� resulting in ever increasing speculative selling, especially from locals and commission houses," Vic Lespinasse, marketwatcher at GrainAnalyst.com, said.

And there was little in the way of fundamental news to push crops back into positive ground.

Frost help

The rail strike in Canada appeared to be having little positive impact on US wheat exports (or even negative ones on Canadian shipments, to judge by comments from the Canadian Wheat Board after the close of trading).

Cold weather improved prospects for the delayed corn harvest, hardening the ground and enhancing crop drydown.

Corn Belt temperatures are expected to be below zero for much of next week.

Sell sign

Soybeans had the biggest sell signal of all hung over them � an observation that the bears appeared to have capitulated.

"Everyone has turned bullish after 30 days of relentless fund buying," Illinois broker Allendale said.

Chicago's January soybean contract ended 2.4% lower at $10.34 a bushel, actually at the bottom of the main grains league.

Corn for December ended down 2.0% at $3.91 � a bushel, with the March contract off 1.9% at $4.06 � a bushel.

Wheat was best of a bad bunch, down 1.4% at $5.54 � a bushel for December and the same drop to $5.76 for March.

'Lacklustre trade'

The drop was reflected in Europe too where, in London especially, volumes appear to have headed off for Christmas early.

The January contract, which drifted on Tuesday to a four-month closing high, slipped back again, moving with the tides of Chicago and sterling. It closed down �0.55 at �107.50 a tonne.

"With very little fresh news and fairly bearish fundamentals over hanging the market, grains continue to look to outside markets again for guidance," Hugh Schryver at Glencore's UK grain arm said, noting "lacklustre trade".

Paris wheat for January fared little better and finished E0.75 lower at E131.50 a tonne.

Record high

For winning trades, bulls would have been better off in sugar, which in London hit a fresh record high as expectations grew of strong demand from India and Pakistan.

The head of India's sugar mills association said the country's output of the sweetener would be less than 16m tonnes in 2009-10 (so 7m tonnes or so short of demand), citing in particular lower sugar content in cane.

Also, India's agriculture minister said that the country wanted to rebuild stocks to 6m-8m tonnes when the market settles down. That is between 1.5 times to four times current inventories, depending on which figures one believes.

"Sugar fundamentals remain strong and reports of Iran purchases of three cargoes of raw sugar seemed to justify the rebound from last week's lows," Nick Penney at Sucden Financial said.

White sugar closed up $7.80 at $626.80 a tonne in London for March delivery, after hitting a record $629.00 a tonne earlier.

New York sugar for March added 0.38 cents to end at 23.04 cents a pound.

By Agrimoney.com

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