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Morning markets: macro mood lifts crops above early softness

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Turnaround Tuesday? Pah.

Investors made an early attempt at quelling the Chicago rally on a day of the week which, by traders' lore, typically sees a reversal of the trend of the previous session.

But by 08:10 GMT, crops had bounced back again in line with a broader risk-on feel, spurred by hopes for the completion of Greece's E206bn debt swap.

Besides, there was some expectation that the Federal Reserve, the US central bank, which meets on Tuesday, might launch another monetary easing programme despite the improved American economic data, although there was a belief that the scope of the support might by curtailed.

Brazil downgrade

Shares

were generally strong in Asia, adding 0.9% in Shanghai and Singapore and 1.2% in Sydney, although up a modest 0.1% in Tokyo.

The safe haven of the

dollar

eased a touch against a basket of currencies, improving the case for dollar-denominated assets by making them more competitive as exports.

Even New York

cotton

, faced with bearish data, managed to bounce again from the closing level of the last session of 88.00 cents a pound, which influential analyst Mike Stevens has called "a rock" in holding price falls.

The May lot added 0.5% to 88.47 cents a pound.

And New York raw

sugar

for May gained 0.3% to 23.84 cents a pound, continuing to feel some support from a downgrade by Copersucar, the Brazilian sugar trading company, to its estimate for output of the sweetener from Brazil's importer Centre South region.

Copersucar cut its forecast for sugar output this year by 2m tonnes to 32, tonnes, and its estimate for the cane harvest to 500m-520m tonnes, from 540m tonnes, denting what had been a picture of gently improving hopes for the top producing region in the top producing country.

Technical signals

And Chicago crops were firm too, despite there being no confirmation yet of the Chinese purchases of US

corn

which have kept the grain buoyant the last few sessions.

In fact, there was some negative news for the grain with Indonesia saying its corn imports will tumble to 1.5m tonnes this year from 3.5m tonnes last year, thanks to expectations for a strong domestic harvest, starting around June.

Technically, Chicago corn is approaching "overbought" territory too, with the relative strength index for the May contract hitting 70.

Still, on the positive side, the lot managed a close above its 200-day moving average, at a little over $6.62 a bushel, in the last session for only the second time in four months.

The contract added a further 0.3% on Tuesday to hit $6.61 ¾ a bushel.

'Susceptible to profit taking'

And that despite some evidence in a reversal of the tide of unwinding "short corn, long

soybean

" spreads, with the oilseed itself adding 0.7% to $13.43 ¾ a bushel for May, looking for its first gain in three sessions.

Not that everything fundamentally is rosy for the oilseed, following Monday's disappointing weekly US export data, as measured by cargo inspections, and the Chinese import number of 3.83m tonnes.

This was below the pace needed for the country to meet a full-year estimate of 55.0m tonnes from the US Department of Agriculture.

Still, early estimates for Chinese imports over next four months "are pegged closer to 5.0m tonnes as crushers seek additional US supplies due to lower South American production", Benson Quinn Commodities said, while adding that soybeans "for now, appear susceptible to further sell-off/profit taking without fresh export demand surfacing".

'Moisture boost needed'

Wheat

, meanwhile, managed to close a little of its discount against corn, adding 0.5% to $6.54 ½ a bushel for May delivery, shrugging off evidence of some improved hopes for US crops.

"Rain is lifting soft red winter wheat prospects in the Midwest while hard red winter wheat crops in the Great Plains are benefiting from light precipitation and mild temperatures," Luke Mathews at Commonwealth Bank of Australia said.

"But a big boost to hard red winter wheat soil moisture is still needed."

(And some other commentators have warned of the risk of a late frost on a crop which, thanks to unusually warm weather, has developed fast so far.)

Mixed picture

US Department of Agriculture data overnight showed some improvement in the Kansas hard red winter wheat crop, of which 53% was rated in "good" or "excellent" condition as of Sunday, compared with 50% a week before.

Texas hard red winter wheat did not see such improvement, managing a marginal improvement in the "excellent" rating, but suffering an increase to 43%, from 39%, in the proportion rated "poor" or "very poor".

"In areas of the Panhandle, dryland wheat and oat crops were stressed due to lack of moisture," the USDA said.

Still, on technical, the grain's picture is looking brighter too, with the gains in the last session having returned the May contract above its 14-day and 50-day moving averages, and cementing a position above the 100-day line.

By Agrimoney.com

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