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Morning markets: SA freeze helps soybeans regain offensive

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Headway was more difficult, even for grains, on Tuesday, with the eurozone political uncertainty hanging over markets.

Many Asian stockmarkets followed Western ones lower, with shares shedding 0.8% in Tokyo, 0.6% in Shanghai and 0.5% in Seoul as investors took fright at the growing likelihood of a Socialist president in France, and after the collapse of the Dutch coalition government.

And negative sentiment was felt among agricultural commodities too.

Cotton

, which has been on a winning run, closing higher for the last five sessions for New York's July contract, fell back 0.3% to 92.25 cents a pound as of 08:40 UK time (02:40 Chicago time).

Bulls in New York raw

sugar

, who have managed to get the sweetener off to some spectacular starts of late, only to be thwarted by late selling, got the July contract a relatively modest 0.3% higher to 21.60 cents a pound.

'Could be construed as supportive'

And in Chicago,

corn

, which resolutely bucked negative external markets in the last session, lost its contrarian streak, as the seesaw of corn vs

soybeans

, which has been evident in plenty of spreading trades, tipped back towards the oilseed.

Indeed, it was difficult to find too much to get nervy about corn itself. Luke Mathews at Commonwealth Bank of Australia noted support for prices from "cold weather in the US and Argentina", and indeed the US Department of Agriculture crop progress data were hardly bearish.

The data, out overnight, showed US corn sowings hitting 28% completed as of Sunday, a fast pace, but not nearly as rapid as investors had expected, with some talking of a figure near 40%.

"The planting progress report could be construed as supportive", to prices Benson Quinn Commodities said.

"It would indicate a slowdown in a large portion of the Corn Belt due to rain, as well as a cool down in temperatures, that kept the planters out of the field in a large area of the upper Midwest including Iowa."

Key ratio

But had investors overegged the pudding in pulling the new crop soybean: corn ratio back to 2.46:1 at the close of the last session, well beneath the 2.50:1 tipping point, below which is seen favouring sowings of the grain over the oilseed?

The ratio expanded back out to 2.49:1 as investors sent new crop December corn down 0.9% to $5.40 ¾ a bushel.

(The old crop July lot fell 0.6% to $6.09 a bushel.)

Meanwhile, new crop November soybeans added 0.5% to $13.47 ½ a bushel, helping the old crop July contract gain 0.3% to $14.44 ¾ a bushel.

'Probably constructive'

Indeed, soybeans appeared to be in vogue despite their own US seedings starting at a record pace, with 6% completed compared with 2% usually by now.

Their decline of the last session appeared to be seen as little more than an opportunity for bulls in the oilseed to extend positions.

And there is plenty of upbeat feeling around about soybean prices, given disappointing South American harvests which have diverted trade America's way, with speculator holding a near record long position in Chicago futures and options.

Cold weather in Argentina looks a setback for soybeans too, given harvest is still underway.

"There were frost/freezes in Argentina over the weekend and more forecast for this week - some quality declines to their soybeans may occur," Mike Mawdsley at Market 1 said.

Furthermore, the last session's price action in the soybeans "can probably be viewed as constructive as it came after a $0.30-a-bushel move higher in old crop soybeans on Friday, at which point, the soybean market was considerably overbought", Benson Quinn said.

Wheat goes it alone

But which would

wheat

side with? Upbeat soybeans or sinking corn?

The answer was neither, with wheat ploughing something of its own furrow in Chicago near opening levels, with the July contract down all of 0.25 cents at $6.32 ¼ a bushel, and the May lot unchanged.

The USDA crop progress report was mildly supportive for winter wheat, as traded in Chicago, given a small decline in the condition of the US crop, from 64% in "good" or "excellent" health to 63%.

It was less so for spring wheat, as traded in Minneapolis, revealing sowings continuing at a record pace, with 57% in the ground, compared with an average of 19%.

In Minnesota itself, "spring wheat planting advanced to 84% complete, compared to 0% last year", USDA officials noted.

Minneapolis spring wheat for July fell 0.2% to $7.92 ¼ a bushel.

Data later

As for whether this price pattern lasts, much may depend on data later from Statistics Canada on sowings intentions in the country.

Some rise in wheat acres is expected from last year, when a wet spring held back seedings. Analysts expect a figure of 23.4m acres for all wheat, a 9% recovery, including a 12% rise in durum plantings.

Potentially the most interesting figure is for

canola

, the rapeseed variant, for which area is expected to climb to a record 20.6m acres, from 18.9m acres last year.

Palm eases

The canola figure could have an impact on the whole oilseeds complex, given Canada's pre-eminence in the crop.

Could it even cheer up

palm oil

, which fell 0.4% to 3,460 ringgit a tonne in Kuala Lumpur, depressed by softening Malaysian exports this month.

The vegetable oil is also particularly sensitive to goings on in the eurozone, a major importing region.

By Agrimoney.com

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