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Morning markets: bumper Chinese harvest keeps a lid on corn

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If anyone doubted reports that China is reluctant to import more

corn

, after buying some 3m tonnes from the US so far this year, official statisticians weighed in with some supportive data.

China's National Bureau of Statistics estimated the domestic corn harvest hit 191.75m tonnes, easily a record, and well above market estimates.

The country's CNGOIC crop bureau had been among the more optimistic observers in pegging the harvest at 184.5m tonnes.

Sure, there is plenty of doubt about Chinese statistics and statements of trading intent. But the figure was hardly helpful to values of the grain in China, where they "are now under pressure from a record harvest", Lynette Tan at Phillip Futures said, or in Chicago.

'No-one willing to go long'

And, nor is the growing competition on export markets highlighted by further disappointing US weekly trade data, and a downgrade to its hopes for corn trade earnings in 2011-12.

Indeed, the US Grains Council reported that traders have been offering Ukrainian feed wheat and corn to Taiwanese buyers for some $13-25 a tonne cheaper than the US is pricing it. (The council, which promotes US grain exports, did raise concerns about the quality of Ukraine's supplies.)

While external markets were broadly a little positive, if cautious awaiting US jobs data later, corn struggled to follow, adding a modest 0.5 cents to $6.02 a bushel for March delivery as of 08:30 GMT.

"The bottom line is no-one is ready or willing to go long grains," Mike Mawdsley at Market 1 said.

"Demand, weather, dollar, something needs to happen to excite the grains/soy complex."

Decline beckoning?

Indeed,

wheat

was hardly a bag of enthusiasm either, adding 0.1% to $6.14 ¾ a bushel in Chicago for March delivery.

The grain's trouble is that there is not enough of a positive catalyst around to lift values, Brian Henry at Benson Quinn Commodities said.

"The wheat trade has the feel of a market that is struggling with oversold conditions, but lacks the fundamental story required to post the potential recovery that has limited the aggressiveness of some would be sellers," he said.

"Unless the news cycle becomes much more supportive, potential buyers will likely have to let the Chicago March contract test the recent low of $5.86 a bushel."

'Strong price premium'

That said, weather has been doing bulls some favours in dumping generously on Australia, bringing downgrades of milling wheat to feed quality.

"Widespread east coast rain is forecast to return mid next week," Luke Mathews at Commonwealth Bank of Australia said.

But that is in the main a support to higher quality wheat, notably of the spring variety, which fared well in Thursday's US export sales data, and whose better price prospects Agrimoney.com highlighted earlier this week.

"High-protein US spring wheat remains in tight supply and commands a strong price premium," Ms Tan said, adding that Minneapolis spring wheat "is seen as a bargain at current levels amid oversold conditions, concerns about Australia's wheat crop and decent weekly exports".

March vs May

In Minneapolis itself, Mr Henry offered some hope for buyers, noting that "a steady supply of spring wheat offered on the spot market continues to soften basis bids, which has taken some pressure off the spread" between Minneapolis March and May contracts.

However, this dynamic "has the potential to be short-lived, if producer selling slows as we approach the holidays and the first of the year".

Minneapolis wheat for March added 0.4% to $8.35 ¾ a bushel, extending its premium over the May lot, which added 0.2% to $8.15 a bushel.

'Tug of war'

Soybeans

proved Chicago's most decisive gainer, adding 0.7% to $11.35 ¾ a bushel, maintaining a slow but steady recovery from Friday's 13-month low.

The oilseed is gaining some support from rumours of further Chinese buying, with some commentators saying weather is less than ideal in South America too, although others have a different interpretation.

Also,

palm oil

, a rival to soyoil in the vegetable oils complex, revived, adding 0.2% to 3,065 ringgit a tonne, helped by bullish comments at a key conference by leading analyst Dorab Mistry, who joined those forecasting a production slowdown next year, supporting prices.

"For the next one year it will be a tug of war between bullish fundamentals and a somewhat uncertain macro-economic situation. I am backing the tight fundamentals to prevail," he said.

Short covering

Staying in Asia,

rubber

put in a negative performance, but only mildly, dropping 0.3% to 280.00 yen a kilogramme, and not enough yet to look like threatening its recovery from a November 11 low.

Ker Chung Yang at Phillip Futures flagged a "scramble to cover shorts" in recent trading as the less gloomy macroeconomic picture, and better industry data, have revived sentiment.

Data from the Japan Automobile Dealers Association showed the country's domestic sales of new cars, trucks and buses rising by 24.1% in November from a year earlier, a third successive month of increase.

By Agrimoney.com

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