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Morning markets: US rain, Spanish debt put ags on defensive

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The concerns over Spanish debt, and China's economy, which punctured market sentiment last week continued to depress risk assets on Monday too, getting agricultural commodities off to a poor start.

It wasn't just crops which were weak.


lost 1.7% in Tokyo, 0.8% in Seoul and 0.5% in Singapore amid fears for how the Spanish debt fears, stoked by data showing huge borrowing by its banks from the European Central Bank, will play out, let alone if China's economy, the world's second biggest, will continue to grow at a slower pace than expected.

But gains were rare in the agricultural commodities complex, with weakness only spurred by further gains in the


, which added 0.3% against a basket of currencies as of 08:50 UK time (02:50 Chicago time), making dollar-denominated assets less competitive as exports.

The dollar hit a two-month high against the euro.

"Volatility and weakness appears tied to 'risk-on/risk-off' mentality of the macro markets," Benson Quinn Commodities said, with Monday making a "risk-off" start.

'Heavy and widespread rain'

What might have helped crops was some suggestion of adverse US weather, of more frost to set back developing crops.

But the weekend appears to have been notable in the country for its wet rather than its cold.

"Over Kansas, Nebraska, South Dakota, the northern half of Missouri, Iowa, southern Minnesota, all of Wisconsin, and into the northern half of Illinois, northern Indiana, the northern half of Ohio and southern Michigan, rainfall amounts were heavy and widespread" on Saturday, said.

"The coverage was 70% in this large area, of 0.50 to 3.00 inches."

It may turn "chilly", east of the Mississippi river late this week, but how cold the weather service did not say.

Record planting pace?

Of course, wet can be a setback too, in preventing farmers getting on with spring seedings.

But given that sowings have got off to a rapid pace, it is still early in the planting season, and soil moisture has been low in some areas, including in the top




growing state of Iowa, the rain looks more of a positive force, from a farmer's perspective.

"Wet weather across most of the US Midwest over the weekend, with more expected into early next week, could delay corn plantings but will also add valuable soil moisture," Lynette Tan at Phillip Futures said.

Data from the US Department of Agriculture later, after the close of Chicago markets, is expected to show growers maintaining a record place of plantings up to Sunday, with up to 20% of the crop in the ground.

Last week saw the window open in states including Iowa, in terms of sowings becoming eligible for government-backed crop insurance.

Prices fall

In Chicago, corn fell 1.0% to .23 ¼ a bushel for May delivery, with May options, which expire on Friday, "not helping" prices, with indicating an average strike price of .20 a bushel, according to Benson Quinn Commodities.


futures fell nearly in line, by 0.9% to .17 ¾ a bushel for May, maintaining a discount to corn.

Soybeans as ever were the best performer, if of a bad bunch, easing 0.6% to .28 a bushel for May.

Rising demand?

Whether they stay that way may depend on US industry soybean crush data due later, expected to come in at 141.5m bushels, a rise on the month and year on year.

As the USDA noted last week, "although demand for soybeans in 2011-12 is far below last season, domestic use picked up modestly in February.

"Rejuvenation of the domestic-crush market for soybeans was precipitated by rallying prices for





Soymeal demand is being boosted "by larger inventories of hogs on hand than originally indicated for the fall and winter quarters", with soyoil demand boosted by biodiesel production in the October-to-February period triple that a year before.

Soyoil itself was 0.7% lower at 56.12 cents a pound for May delivery, with soymeal down 0.6% at 3.40 a short ton.


Soyoil's weakness was unhelpful to rival vegetable oil

palm oil

, which fell 0.3% in Kuala Lumpur to 3,485 ringgit a tonne, maintaining a process of profit-taking from last week's one-year high of 3,628 ringgit a tonne.

In Tokyo, September


dropped a further 1.1% to 306.20 yen a kilogramme.

Ker Chung Yang at Phillip futures noted the depressant effects on the tyre ingredient of poor economic data in China, the top importer of natural rubber.

At least raw


in New York managed to hold steady, at 23.37 cents a pound for May, helped by a forecast from a USDA attaché in Moscow of a revival in Russia's import demand for the sweetener, sapped by 2011-12 by a bumper beet crop.


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