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Morning markets: crops on upward path - rocket allowing

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The better financial market mood which kicked in during the last session – although there was potential for an upset, in the form of a North Korea missile launch.

The launch of Eunha-3, ostensibly to carry a weather satellite into space and celebrate the centenary of the birth of Kim Il-sung, North Korea's founder, has the potential to turn into an international incident.

Airlines in countries such as Indonesia, Japan and the Philippines are rerouting flights well away from the potential path of the rocket, and there are concerns about where the debris will land too.

Still, as of 09:00 UK time (03:00 Chicago time), markets had managed to keep hold of the positive news spurred by indications that the eurozone stands ready to support its more indebted members, such as Spain.

Japan's Nikkei share index closed up 0.7%, while Singapore stocks added 0.9% and Shanghai shares 1.8%.

Key ratio

And agricultural commodities got off to a firm start too, even soybeans which in the last session had suffered a small bout of liquidation, to the benefit of grains, with funds selling down long soybeans-short corn/wheat spreads.

May soybeans added 0.4% to $14.27 ¼ a bushel in Chicago.

Signally, the new crop November soybean contract rediscovered its mojo, adding 0.7% to $13.68 ¾ a bushel, and gaining ground back over the new crop December corn lot, which managed a more modest gain of 0.2% to $5.47 ¾ a bushel.

The moves revived the much-watched new crop soybean: corn ratio back nearly to 2.50: 1, above which it is seen as favouring soybean sowings over corn ones.

The ratio pulled back in the last session, amid ideas that much extra soybean acreage had already been one, and with rumours of a shortage of corn seed anyway to depress plantings of the grain.

'Global dependence on the US'

There was little in the way of fundamentals to support soybeans, although the (South) Korea Feed Association did say it was seeking 45,000-55,000 tonnes of


for July delivery.

However, there was, even in the last session's modest soybean selling, a feeling that liquidation would not stretch too far, given the continued downgrades to South America's harvests, and the boost this might give to US exports of the oilseed.

As Oil World said on Tuesday: "World supplies of soybeans have become much tighter following repeated downward revisions of this year's South American production.

"This will raise the global dependence on US soybeans and products in the first half of next season."

'Focused on freezing temperatures'

Grains continued to gain support from a spell of freezing weather in major US growing areas, on Tuesday night and, potentially, coming back for a second bite currently too.

Luke Mathews at Commonwealth Bank of Australia clocked "concerns that cold temperatures may have damaged US wheat crops - freezing temperatures were recorded across the US Midwest and the northern Plains".

Paris-based Agritel said that "in the US, operators are focused on freezing temperatures on forecast for this morning all over northern and central Plains".

Commodity Weather Group has warned of potential damage to emerging corn in parts of Illinois, Indiana and Ohio, with other commentators flagging risk to soft red winter wheat, the variety traded in Chicago.

'Never seen conditions this dry'

And dryness is becoming an issue for some spring sowing areas too, such as Iowa, the top corn and soybean growing state

Mike Mawdsley, at Iowa-based Market 1, said: "Talked to several farmers on the phone that are out planting. Most are commenting they have never seen conditions this dry for this time of year."

Chicago wheat for May added 0.5% to $6.31 ¼ a bushel, while the May corn contract gained 0.4% to $6.38 ½ a bushel.

Technically, May corn had an extra boost too having closed the last session above its 100-day moving average line, which the contract had briefly surrendered.

Data later

Soft commodities were strong too, with raw


reviving 0.5% to 24.07 cents a pound in New York for May delivery, amid jitters ahead of the release later of first estimates from Unica, the cane industry group, on the Brazilian Centre South cane crop in 2012-13.

While data from Conab, the Brazilian crop agency, earlier in the week suggested a stronger crop than the market has factored in, Unica is viewed as potentially taking a more downbeat view.



continued its revival on Tuesday's cut by the US Department of Agriculture to estimates for domestic stocks at the close of 2011-12, even if world inventories were pegged at a record.

New York cotton for May added 0.7% to 91.97 cents a pound.

Export sales

Whether cotton can remain upbeat may depend on US export sales data due later on, and which last time fell poorly for the fibre.

Among grains, wheat sales are expected at 350,000-650,000 tonnes, old crop and new, in line with the previous week's 512,000 tones.

But some allowance is made for a fallback in corn sales, to 400,000-850,000 tonnes, from the previous week's bumper 1.1m-tonne number.

Soybean sales are expected at 700,000-1.15m tonnes, potentially matching the previous week's 1.11m tonnes.


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