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Morning markets: macro fears keep crop markets on back foot

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Investors continued to show signs of vertigo at higher crop prices on Wednesday, encouraged by macroeconomic factors and a lack of further fresh bullish news on weather.

In fact, Jon Michalscheck at Benson Quinn Commodities questioned whether there had been enough fuss over the wet weather in US corn districts which is significantly delaying spring sowings.

"It is difficult to get too bullish on a wet spring because eventually the producer will get a crop planted and rain makes grain so there should be adequate top and subsoil to get the crop up and going once it does get in the ground," he said.

"What happens after it gets in the ground usually will have more of a lasting impact unless the crop is extremely late in getting planted."

'Hard to be bearish'

Sure, Market 1's Mike Mawdsley spoke for many in taking an opposing view. "It's hard to be bearish corn," he said, highlighting forecasts for "enough rain to continue the delay in timely plantings".

However, he acknowledged how "outside market forces can affect any market day to day".

And macroeconomic factors did appear to be causing concerns, particularly over a news conference later by Ben Bernanke, the head of the US Federal Reserve, after the central bank's latest interest rate decision, and fears of an end to loose American monetary policy evident in super-low interest rates.

Indeed, such jitters were cited as a reason for a drop in copper prices too, which eased 0.5% in London.

Outlook cut

Furthermore, Standard & Poor's, the ratings agency which caused a stir last week by lowering its outlook on America's sovereign debt rating, did the same to Japan this week, reducing to "negative" from "stable" its outlook - in essence, threatening a downgrade.

And this on top of dismal Japanese retail data too.

Tokyo shares actually took the comments in their stride, closing up 1.4% following some firm corporate results, despite last week's earthquake and its aftermath.

But raw material markets appeared to take a more downbeat view over ailments in a large consumer.

'Demand is waning'

And, staying in Asia, Chinese asset prices remained on a downswing too, amid concerns of further monetary tightening.

Shanghai stocks shed 0.9%, falling for a fourth successive session, and agricultural commodity futures were on the back foot too, with the notable exception of sugar, which on the Zhengzhou exchange added 0.8% to 6,819 yuan a tonne for November delivery.

Zhengzhou

cotton

was a notable loser, slipping 2.6% to 24,425 yuan a tonne for November.

That decline catalysed further losses in New York cotton, which shed 2.0% to 157.20 cents a pound for July as of 07:20 GMT (08:20 UK time), taking nearly to 19% the contract's losses so far this month.

"The downturn in Chinese prices is just one more sign that demand is waning after prices touched record levels last month," Ker Chung Yang at Phillip Futures in Singapore said.

Chart signs ignored

Nor were investors in grains enthusiastic buyers although, in

corn

, it was Chicago's new crop December lot which was doing marginally better this time, falling 0.2% to $6.74 ½ a bushel, as opposed to the 0.4% drop to $7.70 a bushel in the old crop July contract.

This move actually went counter to chart signals, which showed that, in the last session, "the old crop months put in an outside day up which is a positive", Mr Michalscheck said.

"On the other hand the new crop contracts ended up putting in a key reversal with a lower close, a negative on the daily charts."

The moves kept December's discount, which hit $1.34 ¾ a bushel on March 1, below $1 a bushel.

Prices dip

Meanwhile,

wheat

shed 0.5% to $8.07 ¼ a bushel for May and the same to $8.43 a bushel for the July lot.

And

soybeans

remained on the back foot, weakened by slower Chinese demand, if gaining some support from low levels of US farm selling too.

"The market is worried about China's future growth, with talk of the country looking to cool inflation seen as a threat to US [soybean] export demand," Mr Ker said.

The May lot lost 0.5% to $13.76 ¼ a bushel, with the July contract down 0.4% at $13.83 ½ a bushel.

By Agrimoney.com

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