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Morning markets: Greece, China hiccups unsettle crop markets

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There is, it seems, a key level for Chicago's March

soybean

contract, which it needs to take out convincingly to extend its rally.

And that is $12.44 ¾ a bushel, a "triple top" in chart terms, according to Brian Henry at Benson Quinn Commodities.

While the contract did manage to climb above it in the last session, this peak failed to trigger fresh purchases, a factor that Mr Henry termed a big "influence on profit taking" that dragged the lot into negative territory by the close.

This finish, "once the market took out $12.44 ¾ indicates that this market is searching for a supportive story".

With supply concerns capped by the improved growing conditions in South America, "it appears this story is going to have to be generated by the macro markets", he said.

Greek, China hiccups

Friday brought little cheer on the macro front.

Joy at Greek agreement, at last, to a E3.3bn cuts package to secure a E130bn bail-out package evaporated when eurozone finance ministers rejected Athens' plans as incomplete.

And China, having offered up disappointing inflation data earlier in the week, returned with further discomforting statistics, on trade, showing a 15.3% slump in imports last month.

Exports fell 0.5% year on year, the first drop since 2009.

Risk-off

There was some hope that this might be something of a one-off, with January bringing Chinese new year celebrations, which last year fell in February.

However, financial markets weren't taking too many chances, returning to risk-off mode.

Shares

fell, by 0.6% in Tokyo, 1.0% in Seoul and 0.8% in Sydney, while the safe haven of the

dollar

rose 0.2% against a basket of currencies, as of 08:45 GMT.

Dollar appreciation in turn mitigated against dollar-denominated assets by making them less competitive as exports.

Brent

crude

fell 0.7%, and London

copper

dropped nearly 1%.

Cotton drops

China's, yuan-denominated, farm commodity markets showed pretty much universal declines, if not of a huge nature.

Cotton

was one of the worst hit, with a 1.0% slip to 22,185 yuan a tonne for the benchmark September lot.

US Department of Agriculture upgrades on Thursday to world cotton supplies, taking the year-end stocks-to-use ratio to a lofty 55%, did their bit here too to sink prices in a country which is the biggest consumer, importer and grower of the fibre.

Imports slip

So the odds were stacked against March soybeans having another crack at $12.44 ¾ a bushel.

Especially, after all, as China is the top importer of the oilseed too, and today's trade data showed its buy-ins falling 14.9% to 4.61m tonnes last month.

And the China National Grains and Oils Information Centre (CNGOIC), the government crop think tank, expects imports to slow further this month, to 3.7m tonnes.

Chicago soybeans for March dropped 0.5% to $12.21 ¾ a bushel.

'Seen as overvalued'

Even so, the oilseed continued to do better than

wheat

, which slipped further under the pressure of world stocks upgraded by the USDA on Thursday to a record high of 213m tonnes.

"Wheat had previous climbed on threats to Europe and Black Sea wheat due to a cold snap and possible export bans," Lynette Tan at Phillip Futures in Singapore said.

"But with world supplies adequate to meet global demand even with crop losses," wheat futures have been "seen as overvalued".

Wheat for March dropped 1.0% to $6.39 ¾ a bushel.

Crucially, this took it back below $6.41 a bushel, its 100-day moving average, a continued stay below which might foster further selling.

And it came despite yet further buying, with South Korea buying 55,000 tonnes at tender, after world purchases totted up by market talk yesterday at 1.4m tonnes.

Back to a discount?

Corn

too flirted with its 100-day moving average, at a little under $6.33 a bushel, hitting $6.32 ¼ a bushel, before staging some recovery to $6.34 ½ a bushel, down 0.4% on the day.

The grain did better than wheat out of the USDA numbers, with downgrades to South American crops, if within the realms of expectations.

"The key change was a reduction in Argentina's 2011-12 corn production to 22m tonnes, down 4m tonnes month on month," Paul Deane at Australia & New Zealand Bank said.

"This has been the market consensus for some time, so had little impact on sentiment."

However, it is seen being weighted down by fellow grain wheat, an alternative in many uses.

Indeed, will wheat fall, once again, to a discount?

By Agrimoney.com

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