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Morning markets: fund data and China conspire to depress ags

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Chinese

corn

prices made a soft start to the week, which was a poor harbinger for Chicago values too.

The decline on the Dalian exchange wasn't huge, of 0.2% to 2,477 yuan a tonne for the best-traded September contract, and still left values within an ace of record highs.

(Some attributed the decline to a softness instilled by data showing Chinese house prices falling 0.1% last month from January, a reminder of a property market which represents one of the key overhanging threats to the country's economy, and thereby the world economic revival.)

But it comes as all eyes are on China, where the "rise in corn prices supports rumours that local supplies are tighter than official government forecasts, which in turn supports the theory that China will again increase imports in 2012-13", Luke Mathews at Commonwealth Bank of Australia said.

Indeed, it has been the rally in China's corn which has managed to, and may continue to, "propel global grain prices higher as it will take at least six months before new-crop supplies in the US, the world's top exporter, replenish stocks estimated to be at their lowest in 16 years", Lynette Tan at Phillip Futures said.

Investor positioning

That was one headwind to another day of firm crop prices in Chicago.

Indeed, corn for May lost early gains to stand at $6.69 ½ a bushel at 08:40 GMT, down 0.5% on the day.

Another bar to bulls was the technical concern about

soybeans

, after regulatory data revealed net long positions held by non-commercial investors, at more than 148,000 contracts, approaching record highs.

While a symptom of upbeat price hopes, historically high net long positions can actually inspire the opposite, in suggesting that further buying pressure may be hard to come by.

Furthermore, they may the crop concerned open to price spikes lower, if negative crop news prompts a wave of investor selling.

'Precariously overbought'

"The soybean market is overbought and due for some type of correction at any time," Mike Mawdsley at broker Market 1 said.

At Benson Quinn Commodities, Kim Rugel said: "Soybeans are precariously overbought.

"The market is ripe for a price correction, a view we have unsuccessfully maintained for the past several weeks."

Still, the market is beginning to get into the thrall of key reports at the end of the month, data on US crop planting and inventories which could "spur some profit-taking".

Indeed, soybeans for May dropped 0.5% to $13.67 ¼ a bushel.

Lost props

Against this background, Chicago

wheat

, which in the face of large world supplies has largely relied on corn and soybeans for support, had little chance.

Sure, Jordan unveiled a tender for 100,000 tonnes of the grain, and barley too.

But on the negative side, some dry parts of Europe received rain over the weekend, although it is yet unclear how significantly rain forecast for Spain, the most needy area, hit home.

Wheat for May stood 0.7% lower at $6.67 ¼ bushel in Chicago, opening wider its atypical discount to corn.

'Concerns may be overdone'

New York soft commodities proved better performers.

Not so much raw

sugar

, which stood up 0.01 cents at 25.42 cents a pound for May delivery, held back somewhat by thinking on worries over a late start to Brazil's cane harvest.

"Some of these concerns may be overdone, particularly given Datagro's estimate that Brazil's Centre South sugar output will rise 9% year on year to 33.9m tonnes in 2012-13," Mr Mathews said, the Centre South being the main production region for the world's top producing country.

Cotton revival

But

cotton

rebounded 0.9% to 88.29 cents a pound for May.

The US regulatory data showed speculators increasing their net short position in cotton futures and options to the largest in nearly five years.

In contrast to soybeans, this raises questions about how forthcoming further selling will be and raises the potential for an upward jump in values caused by covering of short positions.

Furthermore, prices on the Zhangzhou exchange in China, the top cotton importing and consuming country, rose 0.4% to 21,385 yuan a tonne for the best-traded September contract.

By Agrimoney.com

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