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Morning markets: Greek accord boosts farm commodity futures

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Greece was the word, again.

The Greek parliament on Sunday, in the face of more protests in Athens, approved austerity measures needed to win a E130bn bailout package from the European Union and the International Monetary Fund.

The result was that the bearish investors who were in the driving seat heading into the weekend woke up on Monday to find themselves very much in the passenger seat.

Markets resumed a "risk-on" posture which even poor economic data from Japan, showing economic contraction at an annual rate of 2.3% in the last three months of 2011, compared with expansion of 7% in the previous quarter, failed to quell.


Indeed, Tokyo


rose 0.6%, keep pace with gains in Seoul, while Sydney shares added 0.9%.

And the safe haven of the


gave back 0.6% as of 08:30 GMT in another sign of the prevailing wind, and adding a little extra boost to dollar-denominated commodities in making them more affordable as exports.



added 0.8% to regain the $118-a-barrel mark, with


rising in line.

'Could signal an opportunity'

And agricultural commodities held their end up too, especially wheat, which got the extra kicker in the US of victory in an Egyptian grain tender over the weekend.

Egypt's state grain buyer, Gasc, at tender purchased its first US wheat since June, as the competitiveness of the grain put it below French, and especially Russian, offers even when the extra cost of shipping across the Atlantic was included.

Ex-shipping US soft red winter wheat, the type traded in Chicago, was offered at $265.93 a tonne, some $27 a tonne cheaper than rival supplies from Russia, which for the last of 2011 near-monopolised purchases by Egypt, the top importer of the grain.

"Gasc has sourced much of its wheat over the past year from exporters in the Black Sea region, but Russia is suffering from extremely cold weather that has slowed grain transportation at ports and raised concerns about the crop that will be harvested this spring," Lynette Tan at Phillip Futures said.

"This could signal an opportunity for US wheat to take centre stage on the wheat market again with competitive prices deemed to be attractive to importers."

'Threat of winterkill'

And this when wheat buying is in vogue too, to judge by the plethora of orders late last week from the likes of Algeria, Iraq, Iran and Tunisia.

Not that everything is going in favour of wheat bulls, with a cold snap in the US Plains seen more beneficial, in bringing moisture, than a danger, in terms of causing frost damage.

"A cold snap in the Plains is posing a threat of winterkill in some parts of the hard red winter wheat region, but a protective snow cover is in place in what may be the coldest areas," Dave Lehl at Benson Quinn Commodities said.

"South western Kansas and the panhandle regions of Texas and Oklahoma are drier than they would like to be, but moisture received back in January is helping them limp along with the prospect they still could be equal to or better than last year."

Chicago wheat for March stood 1.2% higher at $6.37 ½ a bushel.

Chart factors

Still, technically the contract still remains below its 100-day moving average, of $6.40 a bushel, which was surrendered in the last session, and may provide resistance to upside.

(At least Chicago wheat stayed above its 50-day average, at $6.27 a bushel, unlike the Kansas and Minneapolis March contracts, which remained just below that line early on Monday too.)

Chicago corn went one better by, having lost its 100-day in the last session, at $6.32 a bushel, regaining it by adding 0.8% to $6.36 ¾ a bushel for March delivery.

The better performance by fellow grain wheat, an alternative for many uses, helped.

'Better investor sentiment'

But there was better sentiment around about the grain anyway, with Societe Generale forecasting a further upgrade to US Department of Agriculture estimates for domestic exports of the grain.

Ms Tan said: "Going forward in the week, we see supportive factors as reduced corn production numbers from South America being factored into the prices and better investor sentiment due to the successful passing of the Greek austerity measures."

And the dryness which remains a concern in parts of South America is emerging as a growing concern in the US Corn Belt too.

"If it continues to stay relatively dry until planting starts, then the concern is that there will not be enough subsoil moisture to sustain the corn crop later in the summer months," Michael Cordonnier at Soybean and Corn Advisor said.

Which would be a setback for


too from a growing perspective.

And, with talk still around of further Chinese purchases from the US too, the oilseed added 1.0% to $12.41 ½ a bushel for March delivery, extending a recovery from Friday, when the lot rebounded 11.5 cents in the last 15 minutes of trading.

Cotton hurdles

New York


did even better, jumping 1.8% to 92.23 cents a pound for March delivery.

And this despite two challenges to bullish sentiment, the first being a drop of 17%, year on year, to 326,500 tonnes in imports by China, the top buyer, in January.

Month on month, the drop was 59%, the data from China National Cotton Reserves Corp said.

The second was survey data from America's National Cotton Council over the weekend showing US cotton sowings of 13.63m acres this year, down 7.5% year on year but above market expectations of a 10-12% decline.

However, signs of some unfulfilled demand, particularly below 90 cents a pound, have made investors wary of pushing prices too far lower. The fibre, as a non-food commodity, is also seen as particularly responsive to macroeconomic sentiment.

In Kuala Lumpur

, palm oil

benefited from the risk-on mood too, adding 1.2% to 3,167 ringgit a tonne for the benchmark April contract.


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