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Morning markets: dollar, China spark a turnaround Tuesday

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Tuesday got that turnaround feel.

It might have been expected to be a firm day, given data out overnight from the US Department of Agriculture confirming that the country's campaign to replenish diminished agricultural commodity inventories is getting off to a poor start.

Just 9% of American

corn

was sown as of Sunday, compared with an average of 23% by this time of year, and at the bottom end of market forecasts. Last year, when US planting conditions were as dry and benign as they are wet and challenging now, 46% had been seeded.

Only 6% of spring

wheat

, which is normally a little ahead of corn by now on a percentage completed basis, had been sown. (Plantings of barley, cotton, oats and sugarbeet, and less so rice and sorghum, were behind the average pace too.)

'Two weeks behind schedule'

Meanwhile, the winter wheat already in the ground deteriorated, with the proportion of America's crop rated "good" or "excellent" falling 1 point over the week to 35%, compared with a figure of 69% a year ago.

The trouble is, of course, the dry hard red winter wheat states, such as Oklahoma, where only 5% of the crop was rated in the top two bands.

And weather is not expected to get much better for crops this week.

On corn, Jon Michaelscheck at Benson Quinn Commodities said that "this week's planting progress may not be much better based on another two weather systems moving across the Corn Belt which should put the majority of the main core of the belt a minimum of two weeks or more behind schedule a week from today as we move approach the first week of May".

Dollar hurdle

But if any day is likely to see "buy the rumour, sell the fact" selling, it is Tuesday, a day which Chicago lore has reversing a strong trend the day before.

"There may be some profit-taking going on after the crop rises," Ker Chung Yang and Phillip Futures said.

"And the dollar is strengthening this morning," a factor which makes dollar-denominated assets, such as many crops, less competitive on export markets, and so tends to depress their prices.

At EHedger, Justin Kelly noted the prospect of a news briefing by the US Federal Reserve, which "may create some volatility in the outside markets".

Furthermore, there is another round of speculation of a Chinese interest rate rise, after the state-backed China Securities Journal said that the country's inflation rate could hit 5.5% and stay high for the rest of the year.

There is a holiday period coming up next month too, for labour day, and China has a habit of implementing monetary policy changes during such recesses.

Depressed Dalian

Sure, China may, as Mr Ker said, "look for an opportunity to buy on dips" in crop markets.

But that was not something investors were banking on against this more sombre backdrop, which saw stocks slide too.

Shanghai stocks fell 0.9%, while Tokyo's Nikkei index lost 1.2%, depressed too by poor results from Nintendo and a cut by Standard & Poor's to its outlook for Japan's carmakers.

And Chinese crop futures traded lower, notably Dalian

soyoil

, which lost 1.4% for the best-traded September lot, and Zhengzhou

cotton

, which shed 3.0% for the November contract.

Casualty list

In New York, the decline in cotton prices in the China, the top grower, consumer and importer of the fibre, helped send July futures down 1.5% to 163.90 cents a pound, while the new crop December lot shed 2.8% to 130.27 cents a pound as of 07:30 GMT (08:30 UK time).

And in Chicago, wheat for May retreated from a two-month high of $8.29 a bushel set to in early deals to stand at $8.12 ½ a bushel, down 1.6% on the day. The July lot was 1.5% down at $8.48 a bushel.

Its grain partner corn was a little more resilient, shedding 0.9%, to $7.55 ½ a bushel for May and the same to $7.62 a bushel for July. The new crop December lot lost 1.3% to stand at $6.71 ¾ a bushel.

Harvest progress

Soybeans

, meanwhile, lost 1.2% to $13.72 ½ a bushel for May and 1.3% to $13.78 ¾ a bushel for July, with strong harvest progress in South America also depressing sentiment.

Celeres said that 91% of the Brazilian crop had been harvested, while 49% of the Argentine crop is in the sac, according to government data.

Crop movement later may be influenced by data including the February Case-Shiller index of US home prices, US consumer confidence data for April, with gasoline inventory statistics due after the Chicago close.

By Agrimoney.com

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