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Morning markets: Argentine warning stiffens crops' resolve

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Has the long weekend begun already?

Even for trade in the holiday period, the last trading day of 2011 indeed, volumes in Chicago crops were looking thin on Friday.

Nor were they keen in price to stray far from the closing levels to the last session, despite evidence overnight that the poor South American weather which has buoyed prices for the last couple of weeks was indeed having an impact on crops.

The Buenos Aires grain exchange said that Argentine growers have halted


sowings thanks to the dearth of rain which has left even much of what has been planted in poor condition.

Farmers have so far sown 80% of the 3.7m hectares earmarked for corn.

"A good portion of the early-planted corn in the central part of the country is going through a critical stage of its development under adverse conditions, registering irreversible reductions in yields," the exchange said.

'Additional risk premium'

That is not the end of this issue, of course. There is still plenty of time for weather to improve (rains in February saved a goodly portion of South American crops this year).

"If we come back in on Tuesday morning and the weather switches back to a drier and warmer extended outlook it's highly probable that additional risk premium will be put on the market leading up to the January 12 report Jon Michalscheck at Benson Quinn Commodities said.

(By the January 12 report, he meant the US Department of Agriculture's first Wasde world crop supply and demand briefing of the year, monthly briefings which represent highlights of the farm commodities calendar.)

"On the other hand, if Mother Nature does bring some relief to the areas of concern in the southern hemisphere the market should waste little time in continuing to roll over," adding to Thursday's losses.

"We would be surprised if the nearby March corn contract doesn't retrace back to the $6.00-6.10 a bushel support ahead of the USDA report if some rain does surface in the southern hemisphere."

Period in dispute

The key period appears to be January 6-8.

While Argentina and southern Brazil, the dryness hotspots as it were, look set to be deprived of moisture until then, some forecasters believe that this window could bring sizeable storms.

And even if rain does not arrive until later, there is some potential for farmers refraining from corn seedings to switch to soybeans, which are generally later planted.

Data later

So any change in weather forecasts later could prove a market mover.

As could weekly US crop export sales figures, out a day later this week because of the holiday on Monday.

Trade is expected to be reduced, it being a holiday-disrupted period. Still, the US is seen likely by traders to have sold 200,000-350,000 tonnes of


, down from 362,000 tonnes last time.

For corn, a more sizeable drop is expected, to 400,000-600,000 tonnes, from 953,000 tonnes. For soybeans, the figure is expected to come in at 300,000-600,000 tonnes, compared with the 728,000 tonnes last time.

Chinese data

Other factors that could alter prices by the day's end include the apparent use by funds of month-end, let alone year-end, periods to close positions, and tidy up portfolios or raise money for payouts.

Furthermore, talk of the annual index fund rebalancing process has started. This exercise sees funds sell top-performing commodities, and buy underperforming ones, to revise the weight of their portfolios back to mandated levels.

Furthermore, on external markets, it may be worth watching for any reaction to data showing Chinese manufacturing activity falling again this month.

The HSBC Chinese purchasing managers' index hit 48.7, below the 50-point mark above which means expansion, if beating the 47.7 reading for November.

Price moves

March wheat stood 0.3% higher at $6.46 ¾ a bushel at 08:00 GMT, with March corn up 0.3% at $6.40 a bushel.

March soybeans were 0.2% at $11.99 ½ a bushel, while the lesser-traded January lot, heading into the expiry process, eased 0.2% to $11.85 ½ a bushel.


, however, which is particular exposed to China, the top grower, user and importer of the fibre, lost some of its recent mojo, which has been attributed in part to the crop being likely to be favoured by the rebalancing process.

Cotton for March shed 0.6% to 91.10 cents a pound.


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