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Evening markets: talk of China buying keeps soybeans fizzing

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Ag markets seemed to have got over their concerns about the US mad cow disease case.

Feeder

cattle

for May rebounded 0.6% to 148.80 cents a pound, and live cattle 0.7% to 112.375 cents a pound, recovering a fair portion of the last session's losses, on the discovery of a BSE-infected cow in California.

But that did not translate for long into higher grain prices.

An early bounce caved in, even as soybeans found yet more support to drive them, for May delivery, up 0.8% to $14.73 ½ a bushel, a new best close for a spot contract since September 2008.

Chicago's better-traded July lot rose in line to $14.76 a bushel, while the new crop November lot added 1.4% to $13.70 ½ a bushel.

Indeed, investors at least heeded that part of a Goldman Sachs caution, that markets were undervaluing new crop soybeans given the need to replenish inventories.

'Frost damage'

As an extra reason to buy the oilseed, there were persistent rumours around of more China purchases, although these failed to get confirmation through the US Department of Agriculture's daily reporting system.

"There is talk that China secured up to 500,000 tonnes of soybeans over the course of the last 24 hours," Benson Quinn Commodities noted.

And there was more talk of losses as Argentina's soybean crop, initially stressed by drought, faces up to freezes too.

"Reports out of Argentina that there was frost damage to some of their double crop beans remains a positive force to US soybean prices," Paul Georgy at Allendale said.

Rival broker US Commodities said: "The trade is now concerned Argentina's soybean crop could shrink to 41m-42m tonnes and Brazil to 64m-65m tonnes," below current USDA estimates of 54.0m tonnes and 66.0m tonnes respectively.

Huge export sales

But investors did not heed the Goldman bit about old crop

corn

being priced too low.

And this despite the waning fears over BSE, the rains slowing the US sowing pace (a little) and a mega-order of 262,500 tonnes of corn to China, and a further 420,000 tonnes booked to "unknown", but presumed China, too.

Coupled with 600,000 tonnes to unknown earlier in the week, that amounts to getting on for 1.3m tonnes, more than China imported in the whole of 2010-11.

Yet still corn for closed down 1.2% at $6.11 a bushel for May delivery, and at $6.01 a bushel for July.

The new crop December lot shed 0.7% to $5.38 a bushel, meaning the new crop soybean: corn ratio expanded back out to 2.55: 1, back in territory encouraging farmers still undecided to plant the grain rather than the oilseed.

'Sharp drop'

One setback was the weekly ethanol data which showed US refineries producing 865,000 barrels a day of the biofuel last week, down 19,000 barrels a day on last time, and the lowest figure in six months.

The "sharp" drop questions "US corn ethanol demand for the balance of the season", FCStone said.

But Darrell Holaday, at Country Futures, highlighted the background concerns, "the negative psychology surrounding the prospect of US new crop acreage and production", which has been "accentuated by the US fast planting pace".

"One other reality is that when one evaluates the upcoming prospect for the 2012-13 crop year, it becomes more obvious that the odds of a drop in stocks are extremely low, but the likelihood of a significant increase are high," Mr Holaday said.

'Talk of cold has evaporated'

Furthermore, the latest US weather scare receded.

"All talk of cold temperatures this weekend has evaporated as the colder temperatures now all look to be pushed up north of I-80. That has pressured corn and

wheat

," Mr Holaday said.

Indeed, wheat fell too, despite Saudi Arabia's announcement of a tender for 440,000 tonnes, reviving demand hopes questioned by the absence of tenders from Egypt, the world's top importer, for nearly three weeks.

Chicago wheat for May fell 1.3% to $6.16 ½ a bushel, and for July by 1.0% to $6.26 ½ a bushel.

That was worse that Paris wheat for May, which lost 0.9% to E212.50 a tonne, and London wheat for May, flat at £175.50 a tonne, and despite US commodities getting help from a weaker dollar.

'Possibility of a correction'

Indeed, in New York, raw

sugar

made better use of what were generally favourable macro-market conditions, following decent results from companies including Apple, whose own shares soared nearly 9%.

Sure, Job Economia raised its estimate for Brazil's total sugar output this year by 1.4m tonnes to 32.8m tonnes.

But, with investors more in tune with the idea of immediate demand being raised by lower prices, the July contract added 0.9% to 21.80 cents a pound.

"It is unsurprising that the recent drop in values has attracted end-user attention in both raws and whites after so long waiting on the sidelines," Nick Penney at Sucden Financial said.

"The activity over the past three sessions suggests a temporary bottom may have been reached and there is a possibility of a short-term correction," upward, in prices.

Changeable Harmattan

However,

cocoa

, a star of the last session, lost some of its gains this time, amid an element of market uncertainty, shedding 1.4% to $2,251 a tonne in New York, for July delivery,

"Until there is more clarity over the mid-crops in West Africa, cocoa prices will continue to search for direction in the near term," Kate Tang at Barclays Capital said.

"The strong Harmattan wind earlier this season is expected to lower the 2011-12 harvest after it hampered the development stage of cocoa pods.

"These conditions appear to have damaged the quality of the October-to-March main-crop.

"However, they have subsided in recent weeks, improving the outlook for the April-September mid-crop."

By Agrimoney.com

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