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Evening markets:corn jumps 4%. But should it have been more?

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Agricultural commodities, which of late have made a habit of performing better than many investors expected, on Thursday failed to live quite up to expectations.

OK, the headline gains made reassuring reading for farmers, with




gaining more than 2%, and


closing up nearly 4%.

But that was less than many investors forecast, given the extent of the downgrades by the US Department of Agriculture in its latest monthly Wasde crop report to its estimate for, crucially, the US corn yield.

Analysts had expected some downgrade from last month's figure of 158.7 bushels per acre, to (on average) 155.6 bushels per acre, according to Reuters. (Dow Jones had consensus at 155.2 bushels per acre.)

Whatever, the 153 bushels-per-acre figure, coupled with a higher-than-expected write-off of acres, left the production estimate at 12.9bn bushels, well below expectations.

'A shockingly bullish turn'

The numbers were "definitely supportive" for corn, Darrell Holaday at Country Futures said.

"Overall a shockingly bullish turn in sentiment from the USDA with the trade now wondering if the crop is actually far worse," Matthew Pierce at PitGuru said.

"The Wasde was extremely bullish for corn," Rabobank said.

Yet corn, while trading up the 30-cents-a-bushel daily maximum in early deals in Chicago, was not able to cling on to limit up, with the December lot closing up 25.5 cents, or 3.7% at $7.14 a bushel.

(One analysts before the numbers suggested to that a 153-a-bushel number might send corn limit up for two sessions.)

"The have not been as vibrant as many anticipated after the numbers," Mr Holaday said.

"There has not been a lot of selling, but the market has found it difficult to muster a lot of buying at the higher price levels. Many participants were already long and don't want any more. "

'Bullish surprise'

Nor did soybeans live quite up to expectations, given Wasde yield and crop estimates significantly below forecasts too.

"The USDA gave the soybean market a bullish surprise," Rabobank said, adding that prices of the oilseed "must remain competitive to corn to encourage increased production in South America to offset US losses".

In fact, Chicago's benchmark November contract closed up 2.4% at $13.31 ¾ a bushel.

That was not much more than the average 1.8% for commodities on the day, as measured by the CRB index.

Minny booster

Wheat looked the most bullishly favoured by the markets, keeping pace with soybeans, closing up 2.4% at $7.01 ¼ a bushel in Chicago, despite a Wasde which was broadly considered neutral for the grain.

It was viewed as supportive for US spring wheat, with a notable downgrade, reflected in a 3.0% rise to $8.62 ½ a bushel in Minneapolis, but less so abroad, with increases to estimates for world – and especially Black Sea - production.

Furthermore, US weekly wheat export sales data were, at 376,000 tonnes, "at the bottom end of expectations", Mr Pierce said. (Soybeans' were "about as pathetic as expected", he added.)

Signally, foreign wheat markets were more lukewarm than the US about the Wasde data. Paris wheat, closer to the Black Sea export powerhouses, closed up a more modest 1.3% at E197.50 a tonne for November delivery.

London wheat for November ended up 0.8% at £162.55 a tonne.

'World demand has waned'

Reasons given for the relatively weak – depending on who you talk to - corn and soybean closes included a soft performance by


for much of the day, although crude did perk up in later deals to post gains of more than 3% in New York.

Also there was the demand factor, with the USDA reducing estimates for consumption as well as production.

"There is no doubt that you can feel that USDA is signalling that world demand has waned," Mr Holaday said.

US Commodities said that "livestock and ethanol values will also need to move higher. If they do not with the weak economy we ration sooner than expected".

Surprise upgrade

Beyond Chicago, New York


had a downbeat day, depressed by a surprise upgrade in the Wasde to the US cotton yield estimate, despite the well-documented problems facing the crop.

Production was seen coming in at 19.4m bales, up 650,000 bales on last month's figure, with forecast for year-end stocks raised by 300,000 bales to 3.3m bales.

And, with weekly export sales termed "dismal" by Keith Brown at Keith Brown & Co, the Georgia-based brokerage, the benchmark December lot closed down 1.3% at 96.52 cents a pound.

Sugar downgrade

Elsewhere, Another downgrade by Unica to its forecast for


output in Brazil's Center South region helped New York's October contract add 1.7% to 28.08 cents a pound.

And, in


, broader market revival, with shares sharply higher, was credited for lifting New York's September lot by 2.6% to 240.85 cents a pound.

Perhaps the beans' long-awaited return to speculators' good books has begun.


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