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Evening markets: weather issues help soy, wheat finish firm

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Commodities ended the week on a firm note, many agricultural ones included, as bulls found enough strength to slough off the latest batch of soft data.

Thursday's weak Chinese and European manufacturing data was followed on Friday by mixed US housing statistics, threatening to inject a bit of a risk-off feel.

But a weak


(or really revived euro) down 0.4% against a basket of currencies gave upward movement the benefit of the doubt for dollar-denominated exports, making them cheaper to buyers in other currencies.

The average commodity closed up 0.7%, according to the CRB index.

Weather damage

And, in Chicago soybeans and wheat did even better, boosted in both cases by weather concerns.

For soybeans, South America's disappointing, drought-hit harvest is still an issue, after Argentina came in with a 44m-tonne estimate for its soybean crop, down 4.5m tonnes on the US Department of Agriculture estimate.

"Brazil and Argentina have both reduced their soybean forecasts and traders will expect the USDA to also reduce their forecasts, further tightening soybean stocks," broker US Commodities said.

Darrell Holaday, at Country Futures, said: "The buying in the soybean complex is primarily tied concern about reduced supply of soybeans out of South America."

At Barclays Capital, Sudakshina Unnikrishnan said: "Soybean fundamentals remain positive in our view, underpinned by lowered supply estimates from South America and its implications for a pick-up in US exports."

Corn vs soybeans

However, there were fears too that, with benign weather apparently encouraging US growers to get gung ho about


sowings, soybeans would get overlooked.

"There is that underlying feeling in the market that producers will start planting corn in these good conditions and not stop planting and that will reduce soybean acreage," Mr Holaday said.

That's not to say he agreed, while broker FCStone said that, whatever the weather, "many planting decisions have been made".

FCStone also noted a downside to soybeans from the warm US spring, in that it may bring forward the harvest of soft red winter wheat, and allow many growers the scope to plant a follow-on soybean crop.

"The thing to watch will be the early soft red winter wheat harvest, which will bring more double crop soybeans, and reward those producers," the broker said.

Ethanol considerations

Still, Chicago's May soybean contract added 1.2% to $13.65 ¾ a bushel, while the new crop November lot closed up 0.8% at $13.22 ½ a bushel.

That left it at a ratio of 2.37 to the new crop December corn contract, which only managed a 0.3% gain to $5.57 ½ a bushel – one of the highest ratios of the year, and encouraging any undecided growers to opt for the oilseed.

In fact, corn felt pressure not just from the good sowing weather - with Paul Georgy at Allendale saying he was "hearing reports of corn out of the ground already after being planted for only five days" – but from an ethanol factor too.

Even as one worry for corn bulls receded, that biofuel plants were squeezing more ethanol from the same amount of grain, another reared its head.

Mr Holaday pointed to an "excess amount" of ethanol "Rins", or so-called "renewable Identification numbers", as evidence of soft demand from blenders.

"This will continue to be negative for ethanol margins," he said.

'Momentum shift'

But in the grain's favour was a positive chart signal, with FCStone noting that the last session looked "good technically", with the May contract "trading down to the 100-day move average of $6.38 a bushel but bouncing off it".

"The candlestick formed is a momentum shift and could bring in new buying."

The May contract closed up, but by a modest 0.3% to $6.44 ½ a bushel.

'Dry and trending drier'

That was not enough to keep up with


, which jumped 1.2% to $6.54 ½ a bushel for May, rebuilding a premium over corn, helped by growing concerns for the dryness besetting crops in parts of Europe and North Africa.

"Portions of the European Union and Black Sea regions remain dry and trending drier," Benson Quinn Commodities said.

"Given the short fund position in Chicago, the last things wheat bears need is a story that is even slightly supportive."

Morocco issued a reminder of its own plight by tendering for 180,000 tonnes of soft wheat, of which French grain is likely a favourite to fill.

Paris wheat for May ended up 1.7% at E214.00 a tonne, with London's May lot up 1.3% at £172.50 a tonne.

'Under pressure'

This time New York


had trouble keeping up with the Chicago crops, even though it is tied to them by the battle for acres, and in fact may lose ground to peanuts too, according to PotashCorp.

The May contract closed up 0.1% at 89.63 cents a pound.

But New York


enjoyed a rare up day, closing 1.0% higher at 178.75 cents a pound for May delivery, bouncing off a 17-month low hit in the last session, if only thanks to the prospect of a weekend ahead encouraging holders of short positions to take profits.

There is also talk of buying around the 175-cents-a-pound level.

"Coffee prices have been under pressure through 2012 so far, weighed by expectations of a high 'on'-year crop in Brazil," Ms Unnikrishnan noted.


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