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Morning markets: has Christmas come early to grain markets?

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Has Christmas come early to grain markets?

In the way of holiday trading patterns, that is. Defiance in grain futures gave way to something that looked more like nonchalance.

If there was a prevailing direction to Chicago contracts, it could be said to be downwards, in line with the path of risk assets in general.

Besides the ongoing eurozone crisis, and fears of more downgrades of the euro country debt ratings, the US Federal Reserve disappointed many investors in a statement late on Tuesday in which it failed to signal that it was standing ready to deploy more quantitative easing in a bid to boost economic growth.



lost ground, by 0.4% in Tokyo and 0.3% in Seoul and Sydney, as did Brent


, which eased 0.3% as of 08:40 GMT after gaining in the last session as Iranian military movements raised Middle East tensions.

'La Nina-induced dryness'

And agricultural commodities struggled even to match those movements.



fell 0.2% to $11.16 ¼ a bushel for January, and


by 0.1% to $5.94 a bushel for March delivery, depressed by external markets but also by some ideas that concerns for South America weather may be premature.

Luke Mathews at Commonwealth Bank of Australia said that "increased talk throughout the market that La Nina-induced dryness may evolve and adversely affect crops over the next few months" had come despite "mostly favourable current crop conditions in South America" of late.

What is more crucial is the period beyond the immediate horizon, from Christmas onwards.

Brian Henry at Benson Quinn Commodities, said crop concerns would be "elevated considerably" if expectations of dry weather in that period prove true "as some of the early [corn] crop will be approaching or will have entered the pollination phase by this time".

In soybeans, some 5-10% of the crop in Mato Grosso, the main producing state in Brazil, is in the sensitive pod-filling stage.

Paris-based Agritel said: "It is currently too early to worry about crop damage as long as the [dry] situation does not persist during the month of January."

Palm vs soy

On the demand side, South Korea's biggest feedmaker, Nongyhup Feed, unveiled a tender for up to 210,000 tonnes of US corn.

And later on, the market will get a better indication of US soybean use with industry data on last month's crush.

The market is expecting some uptick from October's figure of 141.2m bushels, with the consensus for November at 142.4m bushels.


stocks are seen building by 20m pounds to 1.896bn pounds, as traders balanced a forecast from the US Department of Agriculture's on Friday of a near-record soyoil yield with talk that western US crushers are seeing less spectacular results from new-crop soybeans, potentially a result of a freeze in early September.

Soyoil itself added 0.1% lower to 49.32 cents a pound in Chicago, for January delivery, while rival

palm oil

added 0.7% in Kuala Lumpur to 3,023 ringgit a tonne for February, still gaining some support from firm Malaysian export data released on Tuesday.

'Absence of bearish news'

It was


which did best to keep up the theme of crops showing some contrarian streak, adding 0.25 cents to $6.00 ¾ a bushel for March delivery, albeit continuing to operate without heavy volumes.

"Only about 42,500 Chicago wheat contracts changed hands on Tuesday, the lowest since December 31 2010," Lynette Tan at Phillip Futures noted.

She attributed the strength in wheat to "traders covering short positions in the absence of fresh bearish news".

They may have noted that "US offers for white wheat in [Tuesday's] Egyptian wheat tender were competitive", noteworthy after US wheat failed to show up at all for weeks thanks to its inability to match prices offered by other exporters.

Mr Mathews noted reports that Ukraine's government has estimated that up to 3m hectares of winter grains, roughly one-third of the total, may need to be reseeded in the spring following autumn drought.


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