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Evening markets: upbeat data, weather woes extend crop rally

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Call it the Santa rally.

Call it the "Christmas feast" for agricultural commodity bulls that Chicago lore had on the cards, after bears "had the Thanksgiving turkey".

Whatever, it drove crop prices higher again.

It was helped by a twin engine of South American weather concerns and a better appetite for risk assets, spurred by upbeat US data.

Imprving US economy?

Sure, there was a downward revision to US economic growth in the third-quarter. But that's in the past.

In the current agenda, new US claims for unemployment benefit fell to their lowest level since April 2008, while consumer sentiment rose for a fourth consecutive month.

Shares

rose in Europe, by more than 1% in Frankfurt, London and Paris, and were 0.4% higher on Wall Street in late deals.

The safe haven of the

dollar

eased, the

Vix

"gauge of fear" volatility index fell to its lowest since July.

Key chart level

Sure, agricultural commodities' gains were not huge, bar those in

soyoil

, which surged 2.0%. Chicago

wheat

did well to add 0.8%.

Indeed, raw materials overall were relatively muted, adding 0.6% according to the CRB index.

But they are beginning to put together a bit of a run, with

soybeans

putting in their sixth successive positive close.

Certainly, they ended that bit nearer 50-day moving averages which, as Agrimoney.com discussed this morning, may prove a key technical battleground.

Minneapolis wheat for March actually moved above its 50-day moving average, of $8.46 ¾ a bushel, at one point, only to close below it, up 0.2% at $8.43 ¾ a bushel.

'When and how hot?'

The South America weather scare kicked in as rain reaching dry (and hot) areas of Argentina and southern Brazil proved largely disappointing, and do not look like getting much better.

"Weather forecasts still do not indicate a round of good general rain in a large part of Brazil and Argentina. The forecasts are obviously supporting

corn

and soybean values," Darrel Holaday at broker Country Futures said.

David Tolleris at weather service WxRisk.com said: "Most if not all of the next 10 days over all of Argentina, Paraguay and southern third of Brazil look dry. Some areas 100% dry."

There was "some uncertainty" about whether the 100 degrees-Fahrenheit heat which has raised concerns about Argentine corn pollination would return - "when and how hot?"

As broker US Commodities noted "about 30% of the Argentine corn crop is pollinating. The hot temperatures last week was worrisome", as they were in the US this summer, cutting yields.

'The next soybean issue'

While the threat to soybeans appears less immediate, given that it was later planted and less developed, the situation here may not be as straightforward as it first appears.

"Double crop soybeans still need to be planted in some areas as wheat is harvested in Argentina," US Commodities said

"This will be the next soybean issue. Do you plant in dry soils?"

And, as an extra kicker to prices, weekly US export sales data were large too for corn, at more than 950,000 tonnes including new crop, and soybeans, at more than 720,000 tonnes.

Wheat sales of some 360,000 tonnes were "at best a neutral number", Mr Holaday said.

Still, they "are still above weekly amount needed to meet the US Department of Agriculture export estimate" of 925m bushels for 2011-12, Benson Quinn Commodities noted.

Short covering

Soybeans for January ended up 0.6% at $11.62 ¼ a bushel in Chicago, where March corn finished up 0.2% at $6.17 ½ a bushel, both one-month closing highs.

Wheat for March actually did best, adding 0.8% to $6.21 ¾ a bushel, with the buying tendency accelerated by a wish among investors to close historically large short positions.

"Probably the most likely reason for the recent [wheat] rally comes from the US, where funds have been wanting to cover short positions before the holiday," traders at a large European commodities house said.

In Europe itself, Paris wheat for March closed up 1.0% at E186.00 a tonne, and London wheat for May up 0.4% at £146.80 a tonne.

'Concerns around future crops in Brazil'

Soft commodities were slightly less enthusiastic in their gains, with New York

cocoa

for March dropping 1.0% to $2,221 a tonne, depressed by a deal in Ghana, the second-ranked producing country, which ended a port dispute which had squeezed exports.

However, New York raw

sugar

added 0.5% for March to end at 23.44 cents a pound, finding some comfort in demand and cost ideas.

"China continues to be an importer and more importantly, rising production costs are raising concerns around future crops in Brazil, which should provide some level of support to prices," Michael Creed, agribusiness economist at National Australia Bank, said.

New York

cotton

added 0.5% to 87.24 cents a pound, helped by US weekly export sales data which, at some 85,000 running bales old crop and new, were not dismal, if hardly bumper.

By Agrimoney.com

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