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Morning markets: drier SA forecasts foster grains revival

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Wheat

futures, especially, had begun to look in a tricky technical situation the way they closed the last session, surrendering in spades hard-won moving average levels.

Such chart points are closely watched, with break throughs seen signalling that more of the same, be it buying or selling, is due, (and, indeed, investors often place automatic orders just above or below moving average lines in expectation of such moves).

So it looked less than promising that the grain, for March, closed in Chicago, just, below its 50-day moving average of $6.29 ½ a bushel, and in Kansas surrendered the 50-day line by a full 5 cents a bushel.

Indeed, the Kansas lot gave up the nine-day moving average too.

In Minneapolis, the home of trading in US hard red spring wheat, the March lot had already surrendered its 50-, 20- and nine-day moving averages, but the July contract in the last session followed suit.

Dollar factor

"Given the settlements, and the indications that the US

dollar

is starting another upward trend, additional fund selling is likely in the absence of news supportive to the ag sector," Brian Henry at Benson Quinn Commodities said.

For "upward momentum" the grain really needed a shift drier in the weather forecast for much of South America, whose malign conditions for

corn

and

soybeans

have fostered a revival in grain futures since mid-December, but which foresee some much-needed rainfall next week.

In fact, at least two factors helped the grain retake some of these chart points in early deals on Friday.

The first was stasis in the dollar, with the markets for now appearing to have digested the latest eurozone debt fears, evident in Thursday's rise in yields on Italian bonds back above the alarm level of 7%.

'Not as wet'

The second was, indeed, a turn drier in the South America weather forecast.

The latest run of the GFS weather model "is not as wet as the last few runs of the GFS over central and eastern Argentina with the cold front that moves in on January 11-12", WxRisk.com said.

"The model has the heaviest rains over Buenos Aires and Entre Rios with amounts to 3.00 inches. But over central Argentina the rains are showing 0.50-1.50 inches with 60-70% coverage."

And looking further ahead, "the GFS now agrees with the European model and develops another heat dome or heat ridge in the 11-to-15 day [timeframe] over Bolivia and Northern Argentina", the weather service said.

Prices rise

That was a help to prices of corn and soybeans, the headline crops most at risk from South American weather woes, which rose in Chicago on expectations of importers shifting orders to the US.

Chicago corn for March added 0.7% to $6.47 ¾ a bushel as of 08:50 GMT, while March soybeans gained 0.6% to $12.16 ¾ a bushel.

And that lifted wheat too, which added 1.1% to $6.36 a bushel in Chicago and 1.2% to $6.94 ¼ a bushel in Kansas, if remaining unchanged at $8.18 ½ a bushel in Minneapolis, the market with the worst technical look of the three.

Too much water, too little

The positive feel spread elsewhere too, with

palm oil

gaining 0.4% to 3,202 ringgit a tonne in Kuala Lumpur for March delivery.

The vegetable oil too has gained support from South American weather woes, given that Argentina is the top exporter of rival

soyoil

(which added 0.9% to 52.50 cents a pound in Chicago for March delivery).

This on top of concerns over too much rain in Malaysia, the second-ranked palm producer, where officials forecasters have warned of downpours lasting until the weekend in many key palm growing regions, hampering harvesting, lowering oil rates and raising question marks over futures crops.

Among soft commodities, New York

cotton

gained 0.5% to 95.17 cents a pound, also gaining succour from ideas that US planted area may fall 10-12% this year thanks to limitations on supplies of water for irrigation caused by southern US dryness.

"But US output in the year ahead is still likely to exceed 2011 levels because of the near record high rate of abandonment last year," Luke Mathews at Commonwealth Bank of Australia pointed out.

Data later

Still, there are plenty of hurdles later in the day which could yet trip up crops.

On the macro-economic arena, the day will provide US non-farm payrolls data, a much-watched report.

Among ags, Egypt, the top wheat importers, will unveil the results of its latest tender for the grain, which will give an indication of the relative competitiveness of supplies from different exporters.

"The aggressiveness of Argentina remains in question. They made a splash before Christmas, but haven't had much of an opportunity since then," Mr Henry said.

And the US Department of Agriculture will unveil weekly US crop export sales data, although covering the holiday period, it is not expected to provide many fireworks.

For wheat, sales are expected at 300,000-450,000 tonnes, compared with 431,000 tonnes the previous week, and for soybeans at 400,000-550,000 tonnes, down from 663,000 tonnes.

Corn sales are expected at 350,000-550,000 tonnes, an increase from the 345,000 tonnes the week before.

By Agrimoney.com

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