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Evening markets: talk of farmers switching as soy beats corn

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New months, by repute, often start with a bit of an uplift in agricultural commodity markets, bringing in extra fund money.

Especially when they bring new quarters too.

And Chicago crops had an extra boost on Monday from lingering impact of the US Department of Agriculture data, on US crop sowings and inventories, which sent prices soaring at the end of last week.

Furthermore, it was a bit of a "risk-on" day, helped by upbeat Chinese factory data, although eurozone manufacturing declined in March for an eighth successive month.

Shares

made ground, with New York's S&P500 index hitting a fresh post-2008 high, while the safe haven of the

dollar

eased 0.2%.

'Require higher prices'

As an extra spur, to corn and soybeans at least, weekly US export data, as measured by cargo inspections, improved.

They hit 28.9m bushels for soybeans, up more than 5m bushels week on week, and 31.0m bushels for corn, a rise of 6.2m bushels.

It was hardly a surprise when futures in both crops closed higher.

"Markets should remain firm as the technical structure has firmed considerably and the fundamental stories related to old crop corn, and old and new soybean crops, will likely require higher prices over time to ration demand," broker Benson Quinn Commodities said.

Corn the leader

May corn, which finished the last session up the exchange maximum, actually did best in the old crop race, rising by 1.4% to $6.53 a bushel .

"The March 1 corn stocks number continues to provide the leadership in the marketplace," Darrell Holaday at Country Futures said, a reference to the inventory figure of 6.0bn bushels, below market estimates of a 6.2bn-bushel figure.

Indeed, the corn lot outperformed old crop May soybeans, which gained 1.3% to $14.21 a bushel, a seven-month high for a spot contract.

'Switching from corn to soybeans'

In the new crop, the opposite was true, with the market continuing to react to Friday's data showing US farmers intend to plant their biggest corn sowings in 75 years, of 95.9m acres, in part at the expense of soybeans.

"Rationing of new crop supplies is needed and a shift to more soybean acres is the goal," US Commodities said.

New crop November soybeans closed up 1.9% at $13.85 ¼ a bushel, 1% or so from their contract high, while new crop December corn added 1.1% to $5.45 a bushel.

That raised to a season high of 2.54 the soybean: corn ratio, heading further above the 2.5 mark seek as giving advantage to soybeans – and perhaps with some effect.

"We are getting calls from producers who are switching from corn to soybeans," Paul Georgy at broker Allendale said.

"We are hearing from seed salesmen who are getting corn seed returned and soybeans seed purchases."

Diverging wheat fortunes

However, in Chicago, at least,

wheat

missed out on the party.

The spreading observed in wheat this morning, with Chicago and Kansas winter wheat contracts easing but Minneapolis spring lots rising, continued encouraged in part by Friday's data showing disappointing spring wheat sowings, and a particular run down in stocks in some spring wheat states.

But also, the condition of the US winter wheat crop is expected to be shown improved in the first US national weekly Crop Progress report of the year, due later.

The crop is expected to be rated 59-61% in "good" or "excellent" condition, compared with 52% in November, and less than 40% a year ago.

(The briefing will also reveal corn sowings expected at 5-7% complete, compared with an average of 1%.)

Fund influence

Furthermore, weekly US export data for the grain were soft too, at 15.4m bushels, in line with those the previous week, but half the levels of the same week in 2011.

All is not lost for Chicago wheat bulls.

Benson Quinn Commodities said: "It appears the funds will be poised to add to net long positions in corn and soybeans based on the recent data.

"They may try to defend a net short position in the Chicago wheat, but these efforts are not going to go very well, if corn and soybeans continue to rally."

Still, Chicago's May lot fell 0.6% to $6.57 a bushel, with Kansas wheat for May dropping 1.1% to $6.90 a bushel.

That contrasted with a 1.4% rise to $8.49 ¼ a bushel for Minneapolis May wheat.

In Europe, somewhat similar dynamics were observed on a smaller scale, with Paris milling wheat adding 0.1% to E213.00 a tonne, while the worse quality London feed wheat dropped 0.5% to £173.75 a tonne.

Rebound continues

Among soft commodities,

coffee

found support from a further round of short-covering, following Brazil's decision late last week to boost credit to farmers, allowing them to ease back on bean sales.

New York's May contract added 2.1% to 186.20 cents a pound.

However, other crops found headway difficult despite the helpful macro-market tailwinds.

Cotton

fell 0.4% to 93.12 cents a pound for May, sapped by fears for Chinese demand, and for US exports, even as concerns waned about Friday's higher-than-expected USDA number for American sowings of the fibre.

'We expect further selling'

And New York raw

sugar

for May dropped 0.5% to 24.58 cents a pound, amid easing supply concerns.

"We continue to favour the downside as physical values for June shipment South Brazil are much weaker relative to prompt," Nick Penney at Sucden Financial said.

"We also approach the tail of the Thai crop and much sugar remaining to be sold, and India ponders how to allocate and distribute its extra 1m tonnes" of permitted exports.

"In short, we expect further selling, some on a book-squaring basis ahead of the Easter holidays."

By Agrimoney.com

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