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Morning markets: China setback leaves ag futures unshaken

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Is China losing its ability to shock markets?

(And North Korea too, after its missile launch, while branded by the US a "provocative action threatens regional security, violates international law and contravenes its own recent commitments" ended in failure.)

The world's second-ranked economy came in with some weak growth figures, with the economy expanding 8.1%, year on year, in the first quarter, the weakest pace in nearly three years, and below market forecasts.

Nonetheless, reaction was mixed.

Shares

gained 1.2% in Tokyo, 1.1% in Seoul and 1.0% in Singapore, and 0.4% in Shanghai itself.

Softer performers

Sure, in commodities, many of which rely hugely on China for patronage, there were certainly some losers, including

copper

, which lost 0.9% in London

Among agricultural commodities,

rubber

, of which China is the top importer, fell 1.2% to 309.70 yen a kilogramme in Tokyo for the benchmark September contract, to among its weakest levels of the last three months.

And

sugar

, of which China is becoming a leading buyer, stood unchanged at 24.22 cents a pound in New York, for May delivery, indeed continuing to puzzle some observers who had expected a bigger reaction after a lower-than-expected industry estimate on Thursday for cane production in Brazil's Centre South region.

Sugar's price reaction in the last session "was generally muted considering the majority of ag markets were up 1% overnight, boosted by better sentiment in financial markets", Paul Deane at Australia & New Zealand Bank said.

China sowings

But

cotton

, of which China is the top importer, producer and consumer, maintained its winning streak, adding 0.6% to 93.55 cents a pound in New York, for May as of 08:40 UK time (03:40 New York time).

And, in Chicago,

corn

led the pack despite China appearing to lend the grain a specific blow, in raising its sowings 3.7% to 35m hectares, so raising the chances of another large crop and limits to the country's import needs.

Interest in planting corn has reached such levels that "supply of corn seeds in parts of northeast provinces has begun to fall short of demand", China's agriculture ministry said, according to a report carried on the Chinagrain.cn website.

Indeed, the data would appear more supportive for

soybeans

, of which China is already the top importer, showing the country's farmers intend to cut sowings by 11.2% - a dynamic echoing that seen in US sowing data reported two weeks ago.

'Sharp, quick move is coming'

Still, it was corn showed the biggest gain, adding 0.3% to $6.39 ¼ a bushel for May in what could be a crucial move, given a technical set-up.

The contract's nine-day, 20-day and 50-day moving averages are all aligned, within 1.5 cents of each other.

"This usually means a sharp, quick move is coming, but which way?" Mike Mawdsley at broker Market 1 said.

Furthermore, Thursday's strong US weekly export sales data, of 976,000 tonnes, which failed to move markets so much in the last session, continued to get a good write-up.

"The old crop sales were nearly 550,000 tonnes above what the trade needs to average per week," to meet US Department of Agriculture expectations for the full 2011-12," Jon Michalscheck at Benson Quinn Commodities said.

The figure "may indicate the end user may want to get their coverage on the books ahead of new crop corn possibly needing to add more of a weather premium as we get further into the growing season".

'Freezing temperatures'

Soybeans themselves added a more modest 0.1% to $14.41 ¾ a bushel for May delivery, continuing to encounter some of the profit-taking which has dogged the oilseed this week at its elevated levels.

The lot in the last session chalked up the highest close since August for a spot contract.

Indeed, soybeans even fell behind

wheat

, which added 0.2% for May to $6.40 ¾ a bushel, amid some, but only some, concern about potential damage from frost.

"Freezing temperatures across the US wheat belt is also supporting sentiment in wheat," Luke Mathews at Commonwealth Bank of Australia said.

"However, most weather forecasters say the damage to wheat crops is likely to be insignificant."

While Thursday night is still happening in the US, on Wednesday night WxRisk.com reported "numerous temperatures in the low and mid 20s [degrees Fahrenheit] across all of Minnesota, central and eastern Iowa, and 28-32 degrees over all of Wisconsin and Illinois, Michigan, Indiana, Ohio and Kentucky".

By Agrimoney.com

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