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Morning markets: crops wince, as external markets sour anew

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Gravity pulled on farm commodities at last.

The weak sentiment evident in external markets in the last session, and in a small minority of farm commodities, notably as corn, spread on Thursday as the fears for eurozone debt, the US economy, etc returned.

Tokyo's Nikkei

share

index dipped 1.3% and South Korea's Kospi 1.7%, with Shanghai stocks down 1.6% in late deals.

The

dollar

revived, adding 0.4% against a basket of currencies, as investors returned to their favoured safe haven, reducing the competitiveness of dollar-denominated exports, including many commodities, in the process.

Oil

fell 0.8% in New York back below $87 a barrel, as of 07:20 GMT (08:20 UK time).

'Disappointing findings'

The recipe was there for a weak performance by farm commodities, and they took it, although declines were modest in early deals.

Sure, there is plenty of bullish talk still going around.

"We are still hearing more and more feedback from producers that have ventured deep into their

corn

fields and report some disappointing findings - poor pollination, ear tipping, etc," Mike Mawdsley at Market 1 said.

"We hear some private estimates are starting to talk about 150 bushels an acre for the nation now."

Chicago vs Kansas

In

wheat

, there is still plenty of chatter about delays to, and results from, the US spring wheat harvest.

And Dave Lehl at Benson Quinn Commodities noted "more and more stories about the dry conditions in the southern plains, and the trouble that is going to create as fall planting season is near".

The dry weather in hard red winter wheat states such as Texas "has many traders looking to buy Kansas [hard red winter wheat] relative to Chicago [soft red] in the July and December 2012 contracts", he added.

And, indeed, Kansas wheat fared relatively well even in Thursday's retreat.

'Only ride the bull for so long'

But the question was how much of such news has already been dialled in.

"The market can only ride the bull for so long on ideas that the yields are continuing to be reduced," Jon Michalscheck at Benson Quinn said, noting that Wednesday's weakness in corn "may have been confirming that the market is getting tired of chasing the lower production chatter of the past six or seven sessions".

"Eventually, there will have to be some confirmation of the reduction."

And there are some smatterings of negative news around on fundamentals too.

'Back on track'

Some analysts have warned that China's sell-down of 4m tonnes of

soybeans

from state reserves may put a bit of a cloud over Chicago's near-term contract.

In fact, the September contract, dropping 0.6% to $13.49 ¼ a bushel, fell in line with the better-traded November lot, down 0.6% at $13.59 ¼ a bushel.

Wheat had the depressant of decent rains, of getting on for two inches in some places, in New South Wales, Australia's second-ranked grains-producing state, where dryness has been a growing concern, albeit with most of the season yet to come.

"The New South Wales crop is back on track," Paul Deane at Australia & New Zealand Bank said.

"The New South Wales wheat belt has received some exceptionally good rainfall over the last 24 hours, taking late planted crops in the central west out of soil moisture deficit."

Chicago wheat for September, which has closed higher the previous seven sessions, dropped 0.9% to $7.21 a bushel, with its Kansas peer 0.4% lower at $8.20 ¼ a bushel.

Chicago corn for December dipped 0.3% to $7.23 a bushel, and weakness spread to New York too, where

cotton

for December followed up a near-limit-up close to the last session with a dip of 0.8% to 106.99 cents a pound.

Data later

As for later, data on US jobless claims, home sales and regional manufacturing are likely to have some bearing on the general financial market mood.

Crop specifically face weekly US export sales data, which are expected at least to match week-before levels.

For wheat, sales are expected to reach 550,000-650,000 tonnes, up from 376,000 tonnes, and in corn 700,000-900,000 tonnes from 753,000 tonnes.

Soybean sales, at 588,000 tonnes last time, are expected to come in at 550,000-850,000 tonnes.

By Agrimoney.com

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