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Morning markets: crop price rally continues - with a twist

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Monday started somewhat as might have been expected – with one exception.

OId crop

corn

for May continued upwards, as might have been expected after closing the last session up the exchange maximum, on a US Department of Agriculture estimate, amid a barrage of data, that US inventories of the grain were lower than expected.

Corn stocks, at 6.0bn bushels (152.6m tonnes) were 15% lower on March 1 than a year before, and some 160m bushels below market expectations.

The contract hit $6.55 a bushel in early deals before easing back a little to $6.53 ¾ a bushel as of 09:20 GMT, up 1.5% on the day.

More of the same

Soybeans

also rose. The USDA data showed US soybean inventories too, at 1.37bn bushels on March 1, a little below market forecasts.

Still, the main takeout for soybeans from the USDA data was a planting estimate, that US farmers intend to sow a modest 73.9m acres with the oilseed, well below 2011 levels besides market forecasts.

Old crop May soybeans rose, by 0.8% to $14.14 ½ a bushel, falling just short of topping Friday's six-month intraday high.

But new crop November soybeans did better, adding 1.1% to $13.72 ¾ a bushel, staging a battle to win back acreage from corn, to which farmers had allocated 95.9m acres for plantings, the most in 75 years.

New crop December corn rose by a more modest 0.7% to $5.44 ¼ a bushel, extending the soybean: corn ratio to a year high of 2.52.

Price reversal

But

wheat's

performance was less straightforward.

Sure, the USDA data was bullish for wheat too.

It showed inventories some 20m bushels below expectations as of March 1, and that farmers intended to seed 55.9m acres with the grain, in the main down to lower spring sowings (but with some downgrade to ideas for autumn 2011 plantings too).

But wheat fell, in Chicago by 0.2% to $6.59 ½ a bushel for May, and in Kansas by 0.2% to $6.96 a bushel.

Inventory twist

That was not quite what many had expected.

At Benson Quinn Commodities, Jonathan Watters had mused that investors might take Friday's 8% rally in wheat "as an opportunity to put sales on once again".

"But that would be overlooking [last week's] massive sell programme which forced wheat kicking and screaming into new long term lows," and which ended with such a strong rebound.

The twist was that investors were taking the opportunity to spread with Minneapolis spring wheat, which soared 1.5% to $8.50 a bushel for May, the highest for a spot contract in nearly two months.

The acreage data was obviously most supportive for spring wheat. But so were the minutiae of the inventory data too.

Total inventories in the big spring wheat state of North Dakota, for instance, were at 104.8m bushels as of March 1, down more than 60% year on year, with South Dakota stocks lower too.

'Highest level in six years'

The USDA data were less supportive for

cotton

, showing a decline of 11% in sowings on the cards for this year's crop – a figure which, when abandonment rates were so high for the 2011 thanks to Texas's drought –means the actual area harvested might rise year on year.

"Given a return to average abandonment rates in the US this season, the cotton area harvested could end up being at its highest level in six years," Paul Deane at Australia & New Zealand Bank said.

"It was going to take a forecast decline in US cotton plantings of greater than 15% from the USDA to give cotton prices a spark."

New York's May cotton lot eased 0.1% to 93.43 cents a pound, while the new crop December lot shed 0.2% to 90.80 cents a pound.

One-year high

Abroad,

palm oil

for June delivery soared to a one-year high of 3,540 ringgit a tonne in early deals in Kuala Lumpur, gaining in soybeans' wake, before easing to 3,535 ringgit a tonne up 3.0% on the day.

The vegetable oil is an alternative in many uses for

soyoil

(of which Argentina and Brazil, whose soybean crops suffered significant drought damage, are major exporters.)

Chicago soyoil itself added a further 0.6% to Friday's gains to stand at 55.45 cents a pound.

By Agrimoney.com

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