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Morning markets: South America weather fears gain momentum

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Agricultural commodities once again bared their contrarian abilities, managing gains even as other assets fell, undermined by the usual concerns over eurozone debt, and a new one, following the death of Kim Jong-il.

Most risk assets found headway difficult, with reports over the weekend that Standard & Poor's was poised this week to downgrade France – getting ahead of rival ratings agency Fitch, which warned on Friday that it might.

Meanwhile, the death of Mr Jong-il, the North Korean president, raised concerns over succession, and what that might mean for relations with South Korea and stability in the region.



markets fell, with the Nikkei losing 1.3%, and Seoul shares themselves 3.4%, and Singapore equities 2.4%.



edged a touch higher, while Brent


was 0.3% lower at a little over $103 a barrel as of 08:50 GMT2

'Heavy snow'

It was enough to get Chicago


off to a weak start, with moisture, if coming in the form of snow rather than rain, easing concerns over dryness in the southern Plains - although not eradicating them totally.

There is "heavy snow coming for the Texas panhandle, the western third of Oklahoma and western/central Kansas over next 48 hours", said.

However, "the possible follow up precipitation event looks like it will form too far to the east to affect the lower Plains".

That said there is plenty of rain in Australia, where it is not wanted too.

CBH Group, the top grain handler in Western Australia, the top wheat producing state, warned over further quality, and in some cases yield, downgrades.

Meanwhile, Luke Mathews at Commonwealth Bank over Australia said: "Widespread heavy rain fell throughout South Australia, Victoria and southern New South Wales over the weekend."

'Very typical of La Nina'

Chicago wheat for March eased 0.1% to $5.83 a bushel.

But other crops did better, supported by the South America weather concerns which have been in the main supporting


but are increasingly filtering through into other crops too.

Indeed, the fears over La Nina-stoked inundations in central Brazil, and more worrying dryness further south into Brazil, gained increased traction.

"The development last week of a large area of low pressure in the Jet stream off the south east coast of Brazil - feeding heavy rains and storms into Minas Gerais, Goias and eastern Mato Grosso while south east Brazil, Paraguay and Argentina turn drier and hotter - is very typical of the La Nina in December in South America," said.

"This tells us that we can expect more of the same as we move into January."

'Getting more traction'

And the oilseed's response to this has been turning technical indicators more positive too.

"South American weather is getting more traction. Futures closed over the 20-day moving average on Friday for the first time since October 28," Mike Mawdsley at Market 1 said, questioning whether the revival means that soybean futures may have put in a "bottom" at last week's 14-month low.

"A close over the downtrend line, near $11.40 a bushel, would suggest yes."

The January contract stood above there in early deals, up 1.1% at $11.42 a bushel.

Japanese buying

And it spread over into


too this time.

"If soybeans continue to find support on the coat-tails of a warm and dry southern hemisphere forecast, corn should find enough support to follow it higher," Jon Michalscheck at Benson Quinn Commodities said.

The grain continued to get help too from a return to Japan, the top corn importer, to buying from the US with a 205,000-tonne order, as revealed by the US Department of Agriculture through its daily reporting system.

"Reports over the past month or so that Japan had turned their attention to the Ukraine, Argentina, and Australia for corn as well as feed wheat has helped in casting a negative bias through the demand side of the trade,"

"So it was probably supportive that we may have found a price level that will bring them back to US corn purchases."

'Downside is limited?'

Still, it wasn't all one-way, with Informa Economics' forecast on Friday of 94.4m-acre US corn sowings next year, the highest since World War II, acting as some depressant.

Chicago corn for March added 0.6% to $5.86 ¼ a bushel, behind the rise in soybeans - if signally enough to regain a premium over wheat.

Technically, it has support too, in defending the $5.80-a-bushel mark, Lynette Tanat Phillip Futures said.

"Thursday's close below $5.80 a bushel was not met with follow-through technical selling as many had expected and the market's ability to bounce back above that level reinforced notions that the downside is limited," she said.

Palm rises

Elsewhere, Kuala Lumpur

palm oil

also took support from the worsened prospects for rival oilseed soybeans.

Palm oil for March added 1.0% to 3,013 ringgit a tonne.

In New York

, cotton

added 0.5% to 86.70 cents a pound for March, amid prospects for worsened sowings in China, the top producer, and the US, the top exporter.

Informa estimated US sowings at 13.15m acres, higher than its last forecast but well down on the 14.7m acres sown for this year's harvest, which PotashCorp had seen repeated for 2012 too.


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