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Morning markets: ag commodities get that Friday feeling

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Fridays often bring an air of investor caution, given that they are followed by two days when markets are closed.

And this one had extra cause to host a bit of a pullback. First, it will bring later the first reading of US economic output in the last quarter of 2011, a particularly anticipated figure.

Secondly, a month end is looming too, another prompt for funds to tidy of up positions.

"We could see some more profit taking going into the weekend," Mike Mawdsley at US broker Market 1 said, noting that, after all, "markets have rallied six straight days".

'Risk areas for winter crops'

Nor did the run of bullish stories on export curbs or weather-battered crops get fresh twists needed to maintain the upward momentum which drove Chicago wheat futures 8% higher in the first four days of the week.

Parts of the former Soviet Union, and not just Russia which grabbed the headlines on Thursday, remain unduly cold (even for the former Soviet Union), but it will be a while before there is a credible assessment of winterkill (or not).

And after all, the Russian winter crop enters the freeze in good health, with deputy prime minister Viktor Zubkov estimating that only 8% of winter plantings are likely to need resowing in the spring, and that crops are in better condition than a year before.

However, "weather conditions are delicate in Ukraine", Agritel's Kiev office said, noting temperatures of -18 Celsius this morning in many regions.

"The cold snap is expected to last one week and southern regions," with less developed snow cover, "are risk areas for winter crops".

Less rain, more rain

It was not enough, anyway, to enable

wheat

to extend it gains, with Chicago's March lot falling back 0.7% to $6.48 ¾ a bushel as of 08:40 GMT.

Nor were South American weather forecasts so supportive to

corn

and

soybean

futures, proving a scrap to both bulls and bears.

"The midday weather models have moved weakened the rains with respect to the cold front on January 31 and the amount of rain it is going to bring the Argentina," weather service WxRisk.com said.

"But they have increased the rainfall amounts and coverage with the second cold front on February 4."

Soybeans for March dropped 0.1% to $12.21 ¾ a bushel.

But March corn recovered early losses to stand 0.4% higher at $6.37 a bushel, continuing to gain some support from the strong US cash market.

Corn export premiums at Gulf of Mexico ports reported at their highest midwinter level in at least a decade, 100 cents a bushel above Chicago futures.

'Looking for another wild ride'

Other factors that should not be ignored are the non-fundamental ones, with corn currently caught between its 20-day moving average, at $6.32 a bushel, and 100-day, at $6.45 a bushel, which was hit in the last session, only to be given back.

Soybeans did the same to their 100-day moving average, at a little over $12.22 a bushel.

March wheat, however, closed above its 100-day moving average, at $6.50 a bushel, in the last session for the first time since May, but had fallen back through it in early deals on Friday.

Some investors are also studying history, Jon Michalscheck at Benson Quinn Commodities said.

"There are a few bulls that are looking for another wild ride during the month of February as the market sets the insurance price for the 2012-13 crop," he said.

"A year ago the market was able to rally $0.63 a bushel on the continuous chart closing out the month of February at $7.22 ½ a bushel.

"But last year global feed grain as well as wheat and soybean stocks were at much tighter levels than we are seeing to date this year."

Margin changes

In line with the idea of crops reversing recent trends,

cotton

, a poor performer earlier in the week, added 0.2% to 95.73 cents a pound in New York, for March delivery.

And a warning for traders in other soft commodities of the potential for speculator-inspired moves, after the Ice futures exchange raised margins for New York

cocoa

contracts by 9% to $2,520 per lot, meaning investors will have to put down a bigger deposit, to cover the risk of default.

However, the exchange cut margins for

sugar

contacts by more than one-third to $2,950 per lot, and on

coffee

by $1,850 to $4,970 per lot.

By Agrimoney.com

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