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Morning markets: grain futures rise ahead of 'data dump'

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Farm commodity markets strengthened in early deals after the first big test of a day with many hurdles was cleared without fault.

This test was Chinese inflation data, which came in at 4.1% for December, representing a fifth successive month of decline from the three-year high of 6.5% reached in July.

As a further sign of Chinese economic wellbeing, the data were welcomed as only raising the chances of the country reversing some of the monetary tightening of the last couple of years, a move which would likely encourage demand for raw materials.

The country is a major importer of farm commodities including

cotton

,

palm oil

,

rubber

and

soybeans

.

'Big driver of price moves'

However, the day has plenty more in store, with the eurozone agenda including a Spanish bond auction, a high profile event given the region's debt concerns, and a European Central Bank interest rate decision.

And in crops, investors face what Commonwealth Bank of Australia termed a "data dump" with not just one key US Department of Agriculture report but three – the monthly Wasde briefing on world crop supply and demand; quarterly US grain and soybean stocks; and US winter wheat acreage figures.

"The quarterly stocks report is likely to be the big driver of price moves," Australia & New Zealand Bank said, noting that the last edition, in October, "saw

corn

prices limit down as corn stocks were 161mbu higher and wheat stock 120mbu higher than trade estimates".

However, January Wasdes have a reputation for moving markets too.

"We have witnessed limit moves the last five January crop reports in corn," Mike Mawdsley at Market 1 noted.

Corn vs soybeans

He added that "obviously, traders are looking for a bullish corn report tomorrow", including downgrades to both South American harvest forecasts and the estimate for the 2011 US crop too.

And, indeed, Chicago's March corn contract rose 0.5% to $6.55 a bushel as of 08:00 GMT.

This time, firmness in corn did not contrast with weakness in soybeans, as in the last session, when investors undertook a stack of spread bets between the two.

"With the trend over last five years for corn market to be either limit up or limit down, the least risky pre-report trade appeared to be long corn and short soybeans based on trades' production and ending stocks estimates for the two crops," Kim Rugel at Benson Quinn Commodities said.

For soybeans, analysts are expecting small upgrades to USDA estimates for domestic production and inventories, if a decline to the world inventory figure.

'All of Argentina dry'

March soybeans added 0.5% to $12.09 ½ a bushel, with some reversal in ideas that much-needed Argentine rain this week has proved plentiful also underpinning prices.

"Argentina saw rains across the corn belt of between 0.5-2.0 inches yesterday. However, areas encompassing a quarter of total acreage saw less than 1.0 inch," Paul Deane at Australia & New Zealand Bank said.

Looking ahead, WxRisk.com said that weather models "keep all of Argentina dry through the next seven days," while rain plagued central Brazil "is super wet".

It was left to wheat to bring up the rear, adding 0.4% to $6.43 ¼ a bushel for March delivery, trading support from fellow grain corn, which has an atypical premium, against what is expected to be a bearish winter sowings report, showing increased acreage.

"Despite concern about dry conditions in the southern plains, I do not expect this [report] to offer much support," Benson Quinn's Brian Henry said.

Rubber's bounce

Elsewhere,

palm oil

eased, undermined by results of a Reuters survey showing Indian imports of the vegetable oil likely fell last month by 23%, sunk by the impact of a weak rupee.

Kuala Lumpur's March contract dropped 0.5% to 3,217 ringgit a tonne.

However,

rubber

maintained its revival, adding 1.2% to 280.20 yen a kilogramme in Tokyo, helped by ideas that Thailand, the top producer, will intervene to support prices, in the face of farmer protest, besides hopes for China boosted by today's inflation data.

Thailand's farm ministry is to seek government approval to buy 200,000 tonnes of rubber from growers, with the idea of boosting prices to at least 120 baht a kilogramme within two months.

"Notably, Unsmoked Sheet 3, a raw material for processed rubber, was sold around 90 baht a kilogramme Wednesday at Thailand's central markets," Ker Chung Yang at Phillip Futures said.

By Agrimoney.com

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