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Morning markets: crop correction fades as corn stabilises

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Was that it?

After a dismal day for agricultural commodity futures in the last session, when US data showing stronger-than-expected crop stocks surprised the market, the calendar provided another reason for investors to be wary this time.

Friday 13 hardly appeared a promising day for bulls to begin a fightback, especially given that it precedes a holiday in the US, which celebrates Martin Luther King day on Monday, with long weekends often seen as a time which encourages investors to get to the sidelines.

'Could corn bottom here?'

But in fact, the recovery late on Thursday, at least in

soybeans

and

wheat

, of some of their losses set the tone for early dealing this time.

Sure,

corn

had unfinished selling business to complete, after ending the last session limit down.

"But May and July contracts did trade near the close. Selling pools were not deep," Mike Mawdsley at Market 1 said.

"Usually the market will continue another day or two in the market made on crop report day – ie down. [But] Could corn possibly bottom here?"

Price moves

Options had indicated that Chicago corn had a further 10 cents to fall this session. And in fact, the March contract had not even managed that as of 08:45 GMT.

After hitting an early bottom of $6.05 a bushel, a drop of 6.5 cents, the lot recovered 3.25 cents to stand at $6.11 ¼ a bushel, representing a fall of 0.25 cents on the day.

And that helped stabilise fellow crops, with wheat standing 0.2% higher at $6.06 ¼ a bushel – its, atypical, discount to corn cut back to 5 cents a bushel.

Soybeans were 0.3% higher at $11.86 ½ a bushel, as yet coming nowhere near revisiting the $11.50-a-bushel mark hit in the last session.

External strength

The resilience was helped by firm external markets, which took cheer at successful Italian and Spanish bond auctions.

Shares

rose on Asian markets, by 0.6% in Seoul, 1.2% in Singapore and 1.4% in Tokyo.

The

dollar

eased 0.2% against a basket of currencies, in a further sign of a risk-off feel, while Brent crude added 0.6% to return close to $112 a barrel.

While

copper

eased, that was attributed to its particularly strong exposure to China, which is reportedly seeing a pullback in demand ahead of its new year at the end of this month.

'Still bullish'

But there was also plenty of feeling that, while Thursday's slew of US data may have shown crop supplies ahead of market expectations, stocks are still thin in corn and soybeans by historic standards.

Luke Mathews at Commonwealth Bank of Australia said: "We wouldn't go so far as saying the USDA reports were outright bearish for corn values.

"After all US corn inventories were reduced slightly month on month and are forecast at their second tightest level in history.

"And we do believe that further reductions to South American corn and soybean production prospects may be forthcoming in future USDA report, particularly if weather conditions deteriorate again over the next few weeks."

At Standard Chartered, Abah Ofon said that, while the USDA data had "wrong-footed" investors, he remained "bullish on oilseeds and corn", while adding that "we maintain the view that the current market sluggishness will linger well into the first quarter of 2012 before more bullish momentum sets in".

Rubber bounces around

The resilience spread to New York

cotton

too, which added 0.05 cents to 95.74 cents despite also suffering what was generally considered negative estimate changes, with the US upping stocks estimates as it forecasting a 4% slide in world consumption of the fibre.

Palm oil

was not so lucky, falling 1.6% to 3,150 ringgit a tonne in Kuala Lumpur, as it played catch up with Thursday's weakness in US oilseed futures.

In fact, the USDA lowered its estimate for Malaysia's end-2011-12 palm oil stocks by 540,000 tonnes to 1.9m tonnes, citing higher export hopes.

Rubber

, which suffered a late reversal on Thursday after the Thai prime minister refused to commit to measures to support prices, recovered 0.1% to 277.80 yen a kilogramme for the benchmark June lot.

By Agrimoney.com

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