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Morning markets: Turnaround Tuesday trips up crop prices

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Agricultural commodities newly-rediscovered contrarian streak worked against higher prices on Tuesday.

Many risk assets got off to a bright start, helped by an improved outlook for the eurozone, after European Union nations – bar the UK – backed plans to raise loans to the International Monetary Fund for tackling the debt crisis.


closed 0.5% higher in Tokyo and 0.9% higher in Seoul, if showing small declines in Shanghai and Singapore. Brent


added 0.5% to return above $104 a barrel as of 07:45 GMT.

But Chicago witnessed symptoms of one of its "Turnaround Tuesdays" – the idea that a strong trend on a Monday is reversed the next day.

Corn vs soybeans

Sure, the weather fears were still around over South American weather proving too dry and hot for the good of


and, especially,



"The potential for a La Nina weather pattern producing some dryness raises the prospect for greater demand of US supplies, which are relatively tight," Lynette Tan at Phillip Futures said, noting that South America "is the main competition for US exporters".

At Australia & New Zealand Bank, Paul Deane said that "the past 30-day rainfall totals in some corn and soybean areas are 30% of normal".

The dryness "will have a bigger effect on corn than soybeans, which are planted later", he added.

'Still in vegetative development'

But there was question over whether the markets had already factored in enough risk for now.

After all, rain in February could reverse a lot of the impact of drought-stress now, according to

And while there are reports of some South American farmers ripping up dryness-ruined corn to make way for soybeans, there are reports of others doing fine and dandy, or having crops that are not yet so vulnerable to moisture deprivation.

"The soybean crops in Brazil and Argentina that are being most impacted by dry and hot conditions are still in vegetative development and, if rains materialise as forecast by month-end, significant permanent damage is not expected," Kim Rugel at Benson Quinn Commodities said.

Rain coming?

And there may be some moisture on its way to some dry areas.

"The main weather issue this week will be the cold front that will try and bring showers and thunderstorms to portions of central and eastern Argentina on Thursday and Friday," said.

"It should be kept in mind however that before we get to the cold front and its storms, temperatures will be quite hot over Argentina and eastern Paraguay with readings between 95 and 102 degrees [Fahrenheit] likely Tuesday, Wednesday and Thursday before the storms hit in the cold front arrives."

Furthermore, as the cold front "drives into northern Argentina and south east Brazil it will fall apart and weaken considerably, and have no real impact by the time and reaches south east Brazil this weekend."

Prices mixed

Sure, chart technicals are looking more supportive for both crops, which closed above their 20-day moving averages in the last session - for corn, for the first time since November 9.

March corn looked on its way to testing just how solid a floor, its 20-day moving average, at $5.95 ½ a bushel, is, shedding 0.8% to $5.96 ½ a bushel.

Soybeans for January remained well above theirs moving average line, at $11.25 a bushel, standing at $11.37 a bushel, unchanged on the day.

Not that


was a star performer either, despite the downgrade to Argentina's crop, and ideas of upward pressure on Russian prices, which helped in the last session.

The grain is getting negative pressure from rains in the southern Plains, improving hopes for dryness-tested crops.

Chicago wheat for March fell 0.7% to $5.95 ¾ a bushel.

Slower exports


palm oil

fell in Kuala Lumpur, depressed by data showing a drop in Malaysia's exports of the vegetable oil so far this month.

Intertek Testing Services put the decline at 10.1%, and Societe Generale de Surveillance at 10.5%.

March palm oil fell 0.6% to 3,003 ringgit a tonne.

In Tokyo,


added 1.0% to 271.50 yen a kilogramme, revived by the higher price of crude, the source of synthetic alternatives to the tyre ingredient.


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