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Morning markets: euro fears inspire turnaround Tuesday feel

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Tuesdays often, in Chicago, witness the reverse of a strong trend the previous session, traders say.

As this one was doing in early deals, boosting its credentials as a so-called "Turnaround Tuesday".

The spark was seen to be the re-entrance of the eurozone debt concerns, with Greece's failure to reach agreement with creditors despite protracted talks.

Furthermore, Standard & Poor's has reportedly turned more negative on six French banks including Credit Agricole and Societe Generale.

The result was a weak opening for European



Also, the


stepped back on the front foot, making dollar-denominated assets, including many commodities, less appealing to buyers in other currencies.


edged lower in London, as did grains in Chicago.

'Follow-up rains critical'

Not that the falls in Chicago were too strong, with South American weather still too dry for comfort in many areas, after disappointing rainfall over the weekend.

"Follow-up rains will be critical, with soybeans now in key flowering and pod-fill stages," Benson Quinn Commodities said, noting that the "current outlook sees the next [rain] event from February 1-4 but not all areas are seen receiving significant rainfall to prevent return crop stress".

Crop downgrades keep coming through, such as Agrural's on Monday, cutting estimates for Brazilian soybeans by 2.9m tonnes to 70.2m tonnes.

Latest estimates, including deep cuts by Argentina's farm ministry in estimates for the domestic corn crop to 23m tonnes, and soybeans to 48.9m tonnes, suggest "downside risk to US Department of Agriculture forecasts" when the world's leading agricultural authority releases its next crop data, next month, Paul Deane at Australia & New Zealand Bank said.

Export demand

Furthermore, the signs of demand are ticking bulls' boxes, with the latest US export data, as measured by cargo inspections, coming in at 35.2m bushels for corn, nearly 4m bushels more than needed to meet the USDA estimate for the whole year.

For soybeans, exports hit 35.7m bushels, compared with fewer than 20m bushels needed, and wheat 17.1m bushels, some 600,000 bushels above target.

Separately, the USDA revealed that drought-hit Mexico had bought a further 153,000 tonnes of US corn too.

'Quick sharp rally could happen'

And this when there are ideas of relatively low levels of net longs by investors in most crops, and a large net short in wheat, signalling that significant buying could lie ahead.

"Funds are still big shorts and if wheat does find bullish news a quick, sharp rally could happen anytime if funds cover shorts," said Mike Mawdsley at Iowa-based broker Market 1.

Benson Quinn Commodities noted the potential for the new-found competitiveness of US wheat on international markets, with Black Sea prices rising, to cause a rethink amongst investors.

"Trend-following funds have been net short the Chicago contract for a considerable amount of time," the broker said, saying that some was down to spreads versus Kansas and Minneapolis wheat, and some to the "bearish nature of the domestic and global supply of wheat".

"Trend-following funds have had a tendency to defend this position in the past. The difference now is the competitive nature of soft red winter wheat [as traded in Chicago] in the global market."

Easier prices

The broader dynamics, firmer dollar or not, have prompted farmers to keep barn doors closed, selling only minimal amount of crop, particularly for corn and soybeans, sending cash prices to historically high levels against futures.

And that was another help to futures not falling further than 0.2% for Chicago corn, to $6.18 ¾ a bushel as of 08:45 GMT, and 0.5 cents for soybeans, to $12.17 a bushel.

For wheat, the decline was by 0.1% to $6.19 ¼ a bushel, all for March contracts. Wheat regained a premium over corn.

Movements in crop prices also face a tangle of moving averages to provide resistance through moving through certain prices, such as the $6.18-a-bushel level for March corn, where stands the 50-day moving average.

One for the completists is that, as Mr Mawdsley noted, March


in the last session "closed over the 100-day moving average for the first time since mid-September", and managed a further 0.1% gain to $321.30 a short ton on Tuesday.

Rubber bounces

Also bucking the downward trend was


which, having closed the last session at a two-month high, edged 0.04 cents higher still to 99.41 cents a pound.

India, the second-ranked cotton producer and exporter, cut by 1.1m bales to 34.5m bales its estimate for the 2011-12 harvest, citing yield losses in Maharashtra and Andhra Pradesh, but edged higher its forecast for exports by 400,000 bales to 8.4m bales.



added 0.7% to 316.50 yen a kilogramme in Tokyo, after the government in Thailand, the top exporter, approved a 15bn-baht price support programme.


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