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Morning markets: crops drop, on temptation to take profits

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Small crops get smaller, Chicago traders say. But, thinking of South America and its drought damaged harvests, how much smaller?

"South American

soybean

production estimates are trimmed almost daily by the analysts," Kim Rugel at Benson Quinn Commodities, part of the Archer Daniels Midland empire, said.

ADM analyst themselves have pegged the Argentine soybean crop at 46.5m tonnes, 1.5m tonnes below the latest US Department of Agriculture estimate, which will be updated next week, and the Brazilian harvest at 69.5m tonnes, 1.5m tonnes below the USDA.

Still, with rains arriving in Argentina - where "central and eastern parts are to run very wet over the next seven-to-10 days", according to WxRisk.com – and President Cristina Fernandez estimating the domestic crop at 48m tonnes, there is the temptation at least to take profit on the oilseed, after its best month in February since December 2010.

Profit-taking pressure?

Certainly, bears had another go at bashing beans. Third time lucky perhaps, after weak starts on Wednesday and Thursday too failed to hold, allowing the oilseed to extend to nine sessions its winning streak.

"I wouldn't be surprised to see some profit-taking going into the weekend for soybeans," Mike Mawdsley at broker Market 1 said.

The March contract fell 0.2% to $13.14 a bushel as of 08:45 GMT, with the May lot dropping 0.2% to $13.19 ¾ a bushel.

'Hard to rally'

With their recent champion failing, other Chicago crops fell too, although the message was more nuanced for

corn

, which, as Mr Mawdsley said, has been "on the sell side of spread - ie buy wheat or soybeans beans, and sell corn".

The March corn contract fell 0.2% to $6.52 ½ a bushel, closing its discount to its wheat equivalent, which shed 0.5% to $6.56 ¼ a bushel.

The May contracts for the grain were on level pegging in terms of decline, both falling 0.3%, corn to $6.51 ¾ a bushel and wheat to $6.62 a bushel.

"Ample world supplies make it hard for wheat in general to rally, particularly with improved weather conditions for winter-wheat crops in the Plains," Lynette Tan at Phillip Futures noted.

"Wheat has fundamental pressure from large world supplies, with stockpiles expected to hit record levels this year. That should limit the impact from supply disruptions in the Black Sea, where cold weather has hindered shipments and damaged some crops."

Ukraine delays

Indeed, Agritel noted a further setback for Ukrainian farmers, with official forecasters saying "that current low temperatures and the persistent snow cap might delay the start of spring field works.

"Work might not start before the second half of the month in the southern regions, and not before April for other regions. This would be a delay of 15 days compared to other years."

Still, it is early days yet to be adding spring crops such as corn to the Ukraine's casualty list, after drought and cold damaged its winter grains.

In neighbouring Russia, the agriculture ministry underpinning hopes for grain supplies in 2012-13, forecasting this year's wheat crop at 57m tonnes, up from 56.2m tonnes in 2011.

Tax rejig

Elsewhere,

palm oil

returned to the back foot in Kuala Lumpur, shedding 0.7% to 3,262 ringgit a tonne, pressed by the impact of changes to Indonesia's export tax regime in favour of processed products over raw oil.

"Refining margins in Malaysia have dwindled significantly after an export tax restructuring by top palm oil producer Indonesia made domestic refined palm oil products a cheaper alternative to those from Malaysia," Ker Chung Yang at Phillip Futures said.

"This prompted buyers to source cheaper Indonesian products, leading to a fall in Malaysian exports last month."

A strong Malaysian ringgit has also added to Malaysian exporters' problems.

Malaysia's palm shipments fell 11% last month to 1.18m tonnes, according to Intertek Agri Services, with rival cargo surveyor Societe Generale de Surveillance putting the fall at 9.5%, to 1.17m tonnes.

By Agrimoney.com

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