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Morning markets: crop futures rise, as China influence grows

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Tuesdays, by repute, often witness in Chicago's grains market a reverse of a strong trend the previous session.

And this one set off with full intention of joining the "Turnaround Tuesday" club (with New York-traded

cotton

and raw

sugar

joining in too).

The rebound was fuelled by a turn brighter in the macroeconomic picture, with Greece citing some progress in talks with the country's creditors in a debt swap deal aimed at securing a second bailout package, and avoiding being sunk by a E14.5bn debt repayment due in mid-March.

In a second boost, Japan reported better-than-expected industrial production data for December.

The safe haven of the

dollar

eased 0.3% as of 09:00 GMT, making dollar-denominated assets that much more affordable to buyers in other currencies, and helping Brent

crude

add 0.5% to return above $111 a barrel.

China's growing influence…

However, China's markets offered support too, in proving broadly firm despite last session's washout in Chicago and New York futures.

The earlier opening of New York sugar trading begun on Monday, to allow arbitrage between these contracts and those traded on the Zhengzhou exchange, is only one sign of China's increasing influence on US futures trading.

Another is the growing influence that prices of Chinese futures contracts are having on those traded elsewhere. (And why not, when the country is such a substantial buyer of the likes of cotton,

rubber

soybeans

and now

corn

and sugar too.)

The failure of Chinese crop futures to make much headway on Monday, after a week-long lunar new year holiday during which Chicago prices soared, emerged as a major reason for the poor performance in the Windy City in the last session.

"Reaction from China markets to last week's strength in US commodity and equity markets was deemed disappointing and lacking in terms of catch-up to US prices," Benson Quinn Commodities said.

"China's grain markets failed to gain much more than 25% of the value of what the Chicago did all of last week."

At Market 1, Mike Mawdsley said: "Traders noted that China's grain futures, after being closed all last week, failed to rally to keep up with our gains last week."

Price echoes

Still, the signals from the East were somewhat better on Tuesday, with corn futures rising on China's Dalian exchange despite closing lower last night in Chicago.

Best-traded September corn added 0.7% to 2,337 yuan a tonne on the Dalian.

And while the September soybean contract fell, the 0.1% drop, to 4,321 yuan a tonne, was far less severe than the loss the oilseed suffered in Chicago.

As a bonus for the softs, Zhengzhou sugar for September added 0.3% to 6,534 yuan a tonne, and cotton gained 0.7% to 22,135 yuan a tonne.

The gains were echoed in New York, where March cotton for March rose 1.1% to 95.15 cents a pound, and March sugar added 0.4% to 23.94 cents a pound

Russian export curbs

Back to the grains, and Russia's potential grain export curbs appeared back in the news, with Ilya Shestakov, deputy agriculture minister, revealing a little more on any restrictions, saying a decision would be based on February exports.

"We are actively discussing it. It is an important aspect of our activity. No one is denying the likelihood," he said in comments which at least confirmed that some kind of curbs were a possibility.

As for cold weather in the former Soviet Union, even if it does not cause winterkill, it is providing a hurdle to aforementioned shipments.

"Exports from the Black Sea are hampered by the current cold temperatures. Loadings are impossible in the Azov Sea due to the ice," Agritel's Kiev office said.

Wheat for March added 0.8% to $6.50 a bushel.

Prices rise – for now

Corn did even better, getting a lift from wheat as well as ideas that rain in Argentina has come too late to rescue this grain from damage caused by heat and dryness during pollination last month.

Corn gained 1.1% to $6.38 ¾ a bushel.

Against that background, and being drawn increasingly into a battle for acres with corn, soybeans took on 0.8% to $11.94 ¾ a bushel for March delivery, although Benson Quinn warned of the potential for setbacks if the disappointing pace of US exports of the oilseed continues.

"Without new interest from China for US soybeans, weather risk premium liquidation could take the soybean market back to post-USDA report low near $11.50 a bushel as private analysts raise US ending stocks to 300m-bushel level," the broker said.

By Agrimoney.com

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