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Morning markets: ag bears shy at prospect of key crop data

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US farmers are better at dodging rains than investors have given them credit for.

The market had expected a sizable slowdown in spring sowings, thanks to rainfall which, in Iowa reached two-to-four inches at the weekend, and three-to-six inches in Minnesota.

And while growers could not match their pace of the previous week, they still got 18% of their corn crop in the ground in the week to Sunday, ahead of expectations of about 14%.



, 12% were sown compared with forecasts of 10% for the week.

Strong pace

The data were on the face of it bearish.

They took US corn sowings to 71% complete - approaching the mid-May cut-off after which yields are seen falling roughly 1 bushel per acre a day - and left soybean seedings 24% finished, well ahead of the average 11% at this time of year.

And certainly new crop lots were hardly off to the races in Chicago in early deals on Tuesday.

But they at least posted some gains, adding 0.2% to $5.26 a bushel for December corn as of 08:55 UK time (02:55 Chicago time) and 0.5 cents to $13.54 a bushel for November soybeans.

External markets

Helping them in part was the continued stabilisation in financial markets from tumbles early in the last session, on concerns over what the election of a Socialist president, Francois Hollande, in France might mean for efforts to tackle eurozone debt.

Mr Hollande won a ticket of lessening austerity in favour of spending aimed at boosting economic growth, a theme which contrasts with the view taken in Germany.

However, thoughts of a Franco-German split were assuaged somewhat by comments that Angela Merkel, the German chancellor, was seeking to build relations with Mr Hollande.



posted gains overnight, recovering 0.7% in Tokyo, 0.5% in Seoul and 0.3% in Sydney.

Data ahead

Furthermore, investors who have already handed losses to Chicago crops, particularly grains, over the last few weeks were reluctant to pile on more ahead of Thursday's US Department of Agriculture Wasde crop report.

The May issue of the influential series of reports will contain the first estimates for global supply and demand in 2012-13, so holds out plenty of possibility for surprise.

Many analysts have forecast at least a slowdown in liquidation moving towards the briefing.

'Spread could narrow'

This trend could not help July soybeans, which eased 0.25 cents to $14.65 ½ a bushel, feeling some pressure from negative technicals, having surrendered their 10-day moving average, as well as disappointing US export data, as measured by cargo inspections, on Monday.

While "unknown bought another 110,000 tons of US old crop, the seventh consecutive business day with a big sale, the weekly export inspections were bearish", Ker Chung Yang at Phillip Futures in Singapore said.

Furthermore, there is a feeling that the spread between the July and November contracts is unreasonably large.

"The July contract is still more than $1.00 a bushel over November. This spread could narrow more yet," Mike Mawdsley at Iowa-based broker Market 1 said.

'Seen the highest yield estimates'



continued its upswing, adding 0.7% to $6.16 ½ a bushel for July in Chicago, and 0.4% to $6.34 a bushel in Kansas, where hard red winter wheat is traded.

There was a little help from the USDA crop progress data out overnight, showing the winter wheat crop declining a touch in condition, by 1 point to 63% rated "good" or "excellent".

Indeed, there are concerns over too-dry conditions around in parts of the southern Plains, and identified by an otherwise upbeat tour of the Kansas crop last week.

"Many wonder if dry weather during this critical window of crop development could mean we've seen the highest yield estimates of the year," Jonathan Watters at Benson Quinn Commodities said.

'Cash is king'

Furthermore, export demand "seems to have picked up in recent weeks," Mr Watters said, while highlighting the recovery of the Chicago July wheat contract against July corn in the last session.

"The spread had collapsed more than $0.40 a bushel over the past two weeks, making a new of -$0.13 at midsession on Monday but coming back to settle -$0.08.

"This could be a sign that the bearish momentum in the wheat market is starting to wane."

And the grain was hardly hurt by a continued rally in corn, for which the old crop lots soared again, lifted by the tearaway cash markets.

"Old crop corn basis continues to be red hot as cash is king," Market 1's Mr Mawdsley said.

The July contract added 0.8% to $6.25 a bushel, with May corn soaring 1.1% to $6.72 a bushel.

Mixed softs

Among soft commodities, New York


got off to a firm start too, adding 0.2% to 86.87 cents a pound, for the July contract, which closed the last session at a 2012 low.

Cotton, as an industrial commodity, is more affected by macroeconomic jitters than many other crops.

But New York raw


revival ran out of steam, with the July lot shedding 0.6% to 20.93 cents a pound, weakened by a poor performance by the sweetener on the Zhengzhou exchange in China, an increasingly important importer.

There, the benchmark September contract fell 0.8% to 6,487 yuan a tonne.


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