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Morning markets: Greece, rain, Moody's bring market reversal

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Trust Tuesday to bring a market turnaround.

The second day of the week, by Chicago lore one which reverses price trends set on a Monday, did its work in early deals, in part thanks to doubts over Greece's debt deal.

Eurozone finance ministers will at a meeting today discuss the smallprint of Greek austerity measures proposed in return for a E130bn bailout package, and whether these cuts can and will be delivered.

Also, the ratings agencies, never far from the headlines these days, put their stamp on the day with downgrades by Moody's to its ratings on six European countries, including Italy, and threats to cut ratings on three further states, Austria, France and the UK.

Their ratings outlooks were cut to "negative", making a future downgrade a strong possibility.

Risk-off

You can guess what happened next.

Financial markets adopted a risk-off pose, with the safe haven of the dollar rising 0.4% and many commodities, such as Brent

crude

and London

copper

eased.

Shares

actually managed a mixed reaction, falling in Seoul and Shanghai but gaining 0.6% in Tokyo, after the Bank of Japan introduced more monetary easing, following Monday's disappointing Japanese economic data.

Still, on agricultural markets, investors had cause for caution with or without Greece and Moody's.

Australia upgrade

For one, Australia lifted by 1.23m tonnes to a record 29.5m tonnes its forecast for its 2011-12

wheat

harvest, adding to the idea of huge world wheat supplies stoked by the US Department of Agriculture.

The USDA last week pegged world wheat stocks at the close of 2011-12 at a record 213m tonnes.

For another, the US southern Plains, where many hard red winter wheat crops have been tested by a drought, is getting some moisture.

"US hard red winter received light to moderate precipitation last week in extreme Kansas and northern Oklahoma," Gail Martell at Martell Crop Projections said.

"This follows heavy precipitation, rain and snow the previous week in same area."

'Prospects have improved'

And a "new storm" was hitting the central US on Monday "causing light snowfall in Nebraska, Iowa and northern Missouri, a mixture of freezing rain and sleet in the Mid South and rain across eastern Texas".

Ms Martell added: "On balance, winter wheat prospects have improved with periods of rain and snow recently."

Meanwhile, cold is receding in the former Soviet Union, although there any damage may have already been done, with growing quantities of snow to protect winter crops.

"Weather conditions are milder this morning in Kiev with temperatures at -10 degrees Celsius and 3cm-4cm of snow cover," Agritel's Kiev office said.

"Forecasts are that temperatures will remain in the range -10/-12 degrees Celsius in the coming days and more snow will fall," the consultancy said, if estimating that 30-40% of winter wheat has "already been impacted by weather conditions".

'Dismal data'

Chicago wheat for March eased 0.6% to $6.37 ¼ a bushel as of 08:50 GMT, a decline which signally for technical investors, took it below its 100-day moving average, signalling potentially further selling to come.

That was some pressure on fellow grain

corn

too, which itself dipped 0.3% to $6.37 ½ a bushel for March delivery, falling below its 100-day moving average.

The grain gained extra pressure from a hangover from Monday's weak US weekly export data, as measured by cargo inspections, coming in at 29.0m bushels.

Benson Quinn Commodities termed this figure "dismal" in falling 3m bushels below the level needs to reach USDA forecasts for 2011-12, and falling even further behind market estimates.

'Growing conditions have deteriorated'

OK, weather in dry parts of South America is still not great, with Ms Martell saying that "Brazilian growing conditions have deteriorated in southern farm states Rio Grande do Sul and Parana from extreme heat and worsening drought the past 3-5 weeks.

"Temperatures in the mid and upper 90 degrees Fahrenheit have been very common even touching 100 degrees Fahrenheit a few days since mid-January," she said.

As for the forecast, this "predicts moderating temperatures and a few more showers, but still calls for below-normal rainfall in south Brazil"

Complex pattern

Still, it is

soybean

crops which still stand to benefit from any rain, with corn yields largely set.

And the forecast, plus ideas that a Chinese visit to the US might unveil a large soybean purchasing contract, helped limit March soybeans recover early losses to stand 0.75 cents higher, taking the contract to $12.52 ¾ a bushel.

Benson Quinn's Kim Rugel added: "Concerns about global

rapeseed

crops has also given support to the soy complex as winter planted crops in Eastern Europe and Ukraine struggle under extreme cold temperatures.

"Ukraine has 'written-off' winter planted rapeseed in eastern and southern regions were lack of snow and extreme temperatures have damaged winter crops."

Rugel also flagged elsewhere in the oilseeds complex a Chinese ban on imports of

canola meal

from India, which has lifted

canola

prices in Winnipeg, Canada, a major exporter, near to give-month highs.

Softs softer

Weakness spread to soft commodities too.

Sugar

faced the depressant of, besides the rising dollar, Thai confirmation of record exports of the sweetener last year, of 6.68m tonnes – a jump of 51% year on year.

While Indonesia unveiled plans to import 240,000 tonnes of raw sugar this year, doubts over whether this represented fresh demand limited the impact on New York futures, which fell 0.6% to 24.50 cents a pound for March delivery.

New York

cotton

fell 0.5% to 91.10 cents a pound, undermined by a 0.6% dip to 22,110 yuan a tonne in the September contract on China's Zhenghou exchange. China is the top grower, consumer and producer of the fibre.

By Agrimoney.com

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