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Morning markets: industrial ags find strength.But not grains

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Some markets continued on Wednesday (the first working day of the week for investors in countries who celebrate May 1 in style) to celebrate upbeat manufacturing data from China and the US.

This was the data, showing quickening factory growth in both of the world's two biggest economies, which was credited with driving New York's Dow Jones Industrial Average (DJIA) share index last night to its highest close in more than four years, of 13,279.

(That's more than twice what the index bottomed out at in 2009.)


rose in Asia too, adding 0.9% in Seoul and 0.6% in Singapore, and made storming starts in Frankfurt and Paris, adding 1.5% or so.

Cotton gains

And some agricultural commodities took strength from such rise.


, for instance, which as an industrial commodity has in the past been shown to have spells correlating reasonably closely with the DJIA, edged 0.1% higher to 89.79 cents a pound for the July contract in New York as of 09:00 UK time (04:00 New York time, 03:00 Chicago time).

A trim by the International Cotton Advisory Committee to an ample 14.3m tonnes, from a more than ample 14.6m tonnes, in its estimate for world cotton stocks at the close of 2012-13 also helped a touch.

In Tokyo,


, another non-edible farm commodity, gained 0.6% to 315.80 yen a kilogramme for the benchmark October contract.

Rain question

But raw


, which closed the last session at its lowest for nigh on a year, continued in its negative vein, falling 0.2% to 20.90 cents a pound.

"While recent rains could pose logistical problems for Brazil's cane crop, the same rains could boost yields later in the season and cause supplies to expand from late-harvested sugar," Lynette Tan at Phillip Futures said.

"Future supplies are looking more secure so people are probably taking a more bearish position."

While there are fears for a dearth of rain in Maharashtra, the top Indian sugarcane state, such concerns could be allayed by the monsoon, which starts in June.

"Importantly, most forecasters suggest the Indian monsoon will be normal this year, meaning crop losses should be averted," Luke Mathews at Commonwealth Bank of Australia said.

Floor for estimates?

But in Chicago, sellers retained the upper hand, even in


, which continued to suffer from the unexpected deliveries against the expiring May contract, indicating futures may be a relatively attractive place for sellers.

Furthermore, the ongoing support from disappointing South American harvests may be running out of steam.

"Private analysts continue to reduce South American production, but nobody has taken production below the 40m-tonne level," in terms of the Argentine harvest, Benson Quinn Commodities said.

May soybeans dropped 0.6% to $14.89 ¼ a bushel, and the July contract by the same to $14.94 a bushel.

Ratio shift

As regards new crop, the November contract ended the last session at 2.58: 1 versus the new crop December


contract, a ratio one broker said "might draw some attention", being the biggest it has been for a while.

Figures over 2.50:1 are seen as encouraging soybeans sowings among US farmers, with corn the better bet below it, although the force of this dynamic is weakening as the acres planted increases.

In fact, the general feeling is that soybeans have already won back some ground from corn, relative to US Department of Agriculture estimates in a March 30 report, which showed the grain gaining acres at the expense of the oilseed.

Soybeans for November lost 0.8% to $13.82 a bushel, which was a little more than the December corn contract, which fell 0.5% to $5.36 ¼ a bushel, although not enough to alter the key ratio.

'Risk to the upside'

Corn continued to feel the weight of growing expectations for the forthcoming crop, after a USDA report on Monday showed US farmers planting one-quarter of the crop in one week, accelerating "planting pace back close to record levels.

"It is still too early in the season to read too much into these figures, as the crops, other than winter wheat, are still in very early days," Paul Deane at Australia & New Zealand Bank said.

"But the risk is that with a plant this early, assuming 'good' weather, the risks to final yield are to the upside."

This has hardly helped corn bulls.

"The funds act as if they want to go short corn like they have been in wheat," Benson Quinn said, if adding that investors appear to be waiting for a cue from the next USDA Wasde crop report, due on May 10, which will come out with first full global forecasts for 2012-13.

Corn for May fell 0.9% to $6.54 a bushel, and for July by 0.5% to $6.26 a bushel.

Healthy crops

And, yes, investors kept up the pressure on wheat too, with the downdraft in corn giving protection from the more positive conditions which would have them scrambling to cover some of their huge net short positions in the grain.

Furthermore, expectations of a good harvest, stoked by USDA data on Monday showing winter wheat in good health, have only been enhanced by early talk coming out from the much-watched annual Kansas wheat tour.

Kansas hard red winter wheat itself, for July, fell 0.8% to $6.51 ½ a bushel. Chicago July wheat was 0.7% down at $6.38 ¼ a bushel.


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