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Morning markets: ags tag along with IMF-inspired rally

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The quest for riskier assets, which lifted shares at least in the last session, continued into Thursday, helped by the International Monetary Fund's move to raise money for tackling the eurozone crisis.

Stronger-than-forecast fourth-quarter results from Goldman Sachs were also credited with underpinning sentiment.

Whatever, this time farm commodities had more problems going against the tide and, generally, recorded gains, if not humungous ones.

As a measure of the backdrop,

shares

rose by more than 1% in Seoul, Shanghai and Tokyo, while the safe haven of the dollar eased against - not just an indication of greater risk appetite but, for dollar-denominated assets, adding the kicker of improving their affordability to buyers in other currencies.

Oil

, undermined in the last session by International Energy Agency showing the first quarterly decline in world consumption since 2009, put on a braver face this time. Brent crude added 0.6% to retake the $111-a-barrel mark, as of 08:30 GMT.

Rain on its way

And among farm commodities, that helped prices of

corn

, which in the US is used largely for making bioethanol, making energy prices a big input – especially in time when, reportedly, US ethanol margins are suffering.

(A better insight on that may be seen later, with weekly US ethanol production data.)

OK, South American weather forecasts were still looking more benign, with models forecasting more rain ahead for dry parts of Argentina and southern Brazil.

Weather models are not necessarily in agreement, with the European one predicting, in Argentina, "less rain over Cordoba and more rain over Santa Fe and Entre Rios, and much more rain over Chaco and Formosa" that the GFS model in one-to-five day outlooks, according to WxRisk.com.

But the picture is a better one for farmers, and intriguingly in Brazil "most of Minas Gerais and Bahia are dry" in the outlook, contrasting with the extreme damp parts have had of late, and perhaps a sign that the La Nina weather pattern blamed for the poor weather is in retreat.

'China actively shopping'

Still, while "rain makes grain", as the saying goes, precipitation will come too late for many crops, and looks more likely to help Argentine

soybeans

than corn.

Chicago corn for March added 0.7% to $5.97 ½ a bushel.

Not that soybeans are proving a dead loss, with widespread rumours around of buying by China of US supplies, as a hedge against crop failures in South America, the other major source of the oilseed.

"Talk of China actively shopping for soybeans has provided some support to this market," Brian Hendry at Benson Quinn Commodities said.

"They will be celebrating their New Year next week and recent activity seems to be front-loading ahead of the holiday."

Furthermore, "it appears crush margins in China are getting better", with the losses processors have been suffering seen as largely behind an unusual dip in the country's soybean imports last year.

'Upside risks to prices'

At Standard Chartered, Abah Ofon, who has long held upbeat views for soybean prices, citing strong Chinese demand, restated his optimism, and a target for Chicago prices of $13.50 a bushel.

"We are particularly bullish on soybeans in the medium-term, he said, noting US Department of Agriculture forecasts that China's imports of the oilseed will rise by more than 4m tonnes in 2011-12.

"The USDA shares our view that demand from China is strong. We continue to see upside risks to soybean prices."

Chicago's March lot, at $11.90 a bushel, still remained some way from his goal, despite adding 0.6% so far on Thursday.

Better for spring sowings?

Wheat

remained the poorest performer of Chicago's big three, adding 0.5% to $5.95 a bushel for March, pulled up by corn from levels likely to be a lot lower than if the grain had to trade on its ample supply fundamentals alone.

"Without support from corn and soybeans, or a production calamity this year, wheat prices will trend lower," Luke Mathews at Commonwealth Bank of Australia noted, adding that weather in most wheat-growing areas was "benign", with even dry Texas receiving up to five inches last week.

And Minneapolis hard red spring wheat was on the back foot, easing 0.75 cents to $8.00 a bushel for March delivery.

The contract has for two weeks been tussling to stay above the $8-a-bushel mark, and a 13-month low which lies just underneath it, as the premium for quality wheat has eroded somewhat with the Australian harvest not proving quite as rainy as some had feared.

Furthermore, a dry winter in the northern US and Canada has raised hopes that spring sowings will at least not be interrupted by overflowing rivers, as happened last year.

Sugar mills' silver lining?

In New York,

cotton

failed to keep up with the grains, shedding 0.4% to 97.12 cents a pound for March delivery, amid a continuation of profit-taking from the recent rally.

Prices were a touch lower on the Zhengzhou exchange in cotton powerhouse China too.

And, sticking with soft commodities, Mr Mathews had a warning for those thinking of buying

sugar

on ideas that the Brazilian rains may delay the start of the country's 2012-13 crushing season, in April.

"We would caution that the additional rainfall would likely be beneficial for cane yields and thus may increase total sugar production in 2012," he said.

By Agrimoney.com

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