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Morning markets: crop markets cool as Greek heat rises

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The moment that markets have been anxiously awaiting, Greece's potential exit from the eurozone – and its ramifications – looked more than a dim possibility on Thursday.

It wasn't just the continued delay to approving a E130bn bailout package for Greece that set nerves jangling.

It was the language which surrounded it, with Germany's finance minister, Wolfgang Schauble, suggesting Greece should install a so-called technocratic government, as in Italy, with a closer understanding of difficult financial matters.

Greek finance minister, Evangelos Venizelos, accused "forces in Europe" of working to push his country out of the euro.

Risk-off

It made unhappy reading, anyway, for those who have been increasing holdings of risk assets.

The safe haven of the

dollar

rose, by 0.5% as of 08:40 GMT, while

shares

fell, and by 1.7% in Sydney, where investors also had some disappointing Australian corporate results to digest.

London

copper

lost more than 1%, and even

oil

struggled, despite the continued tensions in Iran.

And agricultural commodities suffered their fair share of losses, both in Chicago and New York, with the strong dollar only adding to pressure by making them less appealing to buyers in other currencies.

Weak China signal

In New York, raw

sugar

dipped 0.2% to 24.42 cents a pound for March delivery, and by 0.3% to 23.50 cents for May.

March

cotton

dropped 0.6% to 91.92 cents a pound, with the May lot shedding 0.5% to 93.03 cents a pound.

Ideas of mill demand bubbling under took a bit of a hit when futures on the Zhenghzou exchange in China, the top consumer and importer of the fibre, tumbled 2.3% to 21,536 yuan a tonne, for the best-traded September contract.

And in Chicago, even the market's stalwart of late,

soybeans

, felt the pressure too.

Buy the rumour…

This despite China late on Wednesday unveiling a long-awaited deal to buy US soybeans, 8.62m tonnes of them, with further announcements today expected to take the total to 12m tonnes.

That was a figure bigger than the market had expected. Even so, traders had long warned of an air of "buy the rumour, sell the fact" about the event, besides pointing out that such shipments covered supplies which were, essentially, going to be shipped anyway.

China is expected to import more than 1m tonnes of soybeans a week in 2011-12, from all sources.

The March contract dropped 0.8% to $12.51 a bushel.

Corn deal

In terms of Chinese deals, potentially more significant was an announcement that the country had reached agreement with Argentina over importing corn.

While China is increasingly importing the grain, to feed its huge hog herd and in turn satisfy growing demand for pork, it has been restricted to a few sources – the US, the top exporter, and Peru and Thailand, which are less well known as corn-trading nations.

Argentina is to ship a hefty 14m tonnes of the grain in 2011-12, according to US Department of Agriculture figures.

The deal helped ensure corn also got off to a weak start, down 0.7% to $6.22 ½ a bushel – falling just below its 50-day moving average, the last of the big moving averages it has surrendered.

Signal from options

And more falls might be on the way if another technical signal, the pulls from the options market, gains friction.

"A fair amount of selling may also be coming from the fact that March options will be expiring on February 24 and the market may want to gravitate towards the $6.00-a-bushel strike price," Jon Michalscheck at Benson Quinn Commodities said.

"Interest is fairly large in both the calls as well as the puts, at 314,000 plus and 265,000 plus" contracts as of yesterday.

While the calls are centred around $7.00 a bushel, this looks a difficult objective given the barrage of moving average lines now sitting above Chicago futures, providing resistance to gains.

"March puts on the other hand have a mid-point range of $6.00 and that could be a strong possibility as an objective," Mr Michalscheck said.

Egyptian tender

In fact,

wheat

was doing the best out of Chicago's big three, in managing to ease a more modest 0.3% at $6.24 ¼ a bushel for March delivery.

But then it has already underperformed this month, pressed by record world inventories, falling more than 8%.

What has been supportive, however, is a rash of tenders, which Saudi Arabia and, late on, Egypt added to on Wednesday.

Egypt will later on announce the results of its tender, its second in less than a week, which is expected to see US wheat bought, with Europe a strong competitor and Australia an outside bet.

Data later

This is not the only export data that awaits, with the USDA to unveil weekly US export sales data, which for soybeans are forecast to come in at 600,000-750,000 tonnes, old crop and new, in line with the 658,000 tonnes the previous week.

Investors are making allowances for retreats in grain shipments.

Wheat's, which set a multi-month high of 708,000 tonnes last time, are pegged at 450,000-650,000 tonnes, and corn's at 550,000-750,000 tonnes, compared with the previous 758,000 tonnes.

By Agrimoney.com

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