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Morning markets: corn leads decline as China auctions stocks

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Hopes of a firm start to the week for financial markets withered with eurozone finance ministers' failure on Sunday to progress efforts to deal with the region's debt problems.

That reversed the confidence booster provided by joint central bank action last week and sent markets into a broad "risk-off" attitude.

Asian shares fell, with Shanghai stocks down 1.6% in late deals, the

dollar

rose 0.5% against a basket of currencies, New York

crude

dropped 1.1% to just over $87 a barrel,

copper

slid 1.9%… the usual format.

And there was not much to stop agricultural commodities joining in.

"It's a money flow game for the moment with funds bailing out," Mike Mawdsley at Market 1 said. Indeed, latest regulatory data showed large funds in particular bailing out of corn in the week to September 13.

Ukraine undercutting in corn too

Fundamental news on crops was hardly encouraging, with China revealing the sale of an unspecified amount of

corn

from state reserves, easing a shortage in domestic supplies before the (apparently record, 180m-tonne plus) harvest comes in.

Crucially, that might appear to cut the chance of Chinese buyers emerging in the US on the current break in prices - as they have done in the past, and prompted a rapid reversal in Chicago corn futures in so doing.

And even if they did so, there is a growing focus on the record harvest in the offing from Ukraine.

"Ukrainian export origin corn offers are $10 a tonne under US corn, excluding freight, and are pressuring US futures prices," Paul Deane, at Australia & New Zealand Bank, said.

Corn vs soybeans

On the supply side, talk of US yields is more favourable than had been expected, although it is still, of course, early days.

"Currently corn yields seem to be a bit better in places, but

soybeans

are disappointing in Illinois is what we are hearing," Mr Mawdsley said.

Chicago corn for December dipped 0.8% to $6.86 ½ a bushel as of 07:30 GMT (08:30 UK time), setting a five-week low for a spot contract.

Nor did yield talk help soybeans much, with fears over frost damage to Canadian canola last week wearing off a bit too.

The November lot shed 0.7% to $13.45 ½ a bushel.

Rains on the Plains

As for

wheat

, its ample world supplies, which have left it reliant on fellow grain corn for support, left it lower too in Chicago, although it did manage to claw back another cent or so of its atypical discount against corn.

"Continued fund liquidation and lack of upside leadership from the corn market does not help wheat amid large global supplies and a lack of production concerns from other world markets, apart from the dryness in the southern Plains," Dave Lehl at Benson Quinn Commodities said.

And some parts of the drought-hit southern Plains received more rain over the weekend, getting nearer the total needed to bring some optimism over hard red winter wheat sowings.

Kansas and eastern Oklahoma, at least, received rains of 0.25-2 inches on Saturday-and-early-Sunday timescale, according to WxRisk.com.

That said the Mississippi Delta, "deep South and eastern Corn Belt was dry", the weather service added.

Chicago wheat for December fell 0.7% to a five-week low of $6.83 ¼ a bushel.

'Demand very weak'

The lack of rain helped limit the drop in

cotton

too, to 0.3%, taking New York's benchmark December lot to 110.19 cents a pound.

Sure, at Luke Mathews at Commonwealth Bank of Australia noted, "the cotton market remains aware that physical cotton demand remains very weak, evidence by the big export sales cancellation from the US last week.

"Further demand destruction remains a distinct possibility given current cotton prices are exceptionally high and the global economic outlook is very weak."

However, John Robinson, at Texas A&M University, has pointed out a selection of reasons not to be too hard on the fibre, including uncertainty over the US crop and a dearth of inventories for delivery against futures.

Certified stocks to delivery against New York futures "remained low" as of Septemebr 15 at 29,088 bales, meaning "there is not much of a credible threat of deliveries against cotton futures contracts", Professor Robinson said.

By Agrimoney.com

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