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Morning markets: oilseeds revive, shrugging off China data

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The surprise was not so much that the grains managed to outpace an uncertain start in external markets, and build on gains in the last session.

What was less obvious was the strong rebound in

soybean

prices, which bounced 1.3% in Chicago to $13.67 ½ a bushel for May delivery as of 08:50 GMT, more than recouping their losses of the last session.

The overnight news had appeared to add even more pressure to that prompted by Thursday's dismal weekly US export sales data, with crop truckers in Argentina, a major exporter of the oilseed, agreeing terms to end a strike over haulage rates.

And many other markets were still fretting on Friday over China's poor manufacturing data, showing another month of shrinking factory activity in a country which is a huge buyer of raw materials, including soybeans.

Shares

dropped 1.1% in both Shanghai and Tokyo, and eased a touch in Sydney, if showing 0.3% gains in Singapore.

'Rather constructive'

However, Brian Henry at Benson Quinn Commodities had a different take, saying that soybeans had actually enjoyed a "rather constructive" session on Thursday, given the extent of the headwinds, such as the China factory and US export data, ranged against it.

"May soybeans traded below Tuesday's low of $13.41 ¾, but didn't trigger a large number of stops," he said.

Furthermore, there was talk of trade buyers getting interested. "It seems end users were good buyers of the lower trade, which is a good sign that someone finds value near these levels

"End-user buying doesn't pack the same punch as fund buying, because the end user is willing to work the order instead of chasing the next offer," Mr Henry said.

"However, it does provide good support and it may have been the key factor in early sellers looking to cover short positions late in the session."

Knock on effect

At Commonwealth Bank of Australia, Luke Mathews shed more light on to the reasons for end-user buying, noting that prices of

soymeal

, one of the two key products from processing soybeans "continue to hold up strongly".

Indeed, Chicago's May soymeal contract rose in the last session despite soybean weakness, and added on Friday to its gains, by 1.1% to $374.20 a short tonne.

Soymeal prices are being helped noted just by weaker US corn ethanol production in 2012, which means diminishing supplies of the byproduct of distillers' grains, a rival animal feed, but a change in biofuel plants' operations too.

It seems that ethanol plants are reducing the fat levels in distiller's grains from about 10% to about 5% by mining the byproduct for valuable corn oil.

"This is making distillers' grains end-users taking a look at the 'value' of that product. This can push more soymeal and

wheat

in to the ration for the energy," broker FCStone said.

Palm springs

As an extra boost to soybeans,

soyoil

, the other main processing product, rose 1.5% in Chicago to 54.74 cents a pound for May, lifted in turn by rival

palm oil

, which soared 2.2% to 3,414 ringgit a tonne in Kuala Lumpur, for June delivery.

Palm oil's rebound was attributed itself to ideas that a drop in prices in the last session, on China fears, may have been overblown.

Signally, a hard commodity of which China is a top importer,

copper

, rose too, by 1.3% in London, recovering most of Thursday's losses.

And soybeans, and especially soyoil, rose on China;s Dalian exchange overnight, the latter by 0.9% for September delivery to 9,654 yuan a tonne.

Options influence?

For the grains,

corn

was helped 1.0% higher to $6.51 a bushel by soybeans, as attention reverted from long/short spreads to the crops' battle for US spring acres.

Corn appears set for a huge area, although investors are awaiting confirmation of this in a key US Department of Agriculture report in a week's time.

Interestingly, its current price puts it bang in line with the price of the major holdings in April options, which expire on Friday, and are said by some to be having a big impact on the corn market as investors jostle futures and options holdings.

And there is talk of cash markets bottoming out too, as farmers' focus turns to planting the next crop rather than selling the last.

'Positive trade news'

Corn's rise saw it overtake wheat again too, which rose, but by a more modest 0.7% to $6.50 ½ a bushel for May delivery.

The grain continued to gain support from strong export numbers on Thursday both from the European Union, where weekly shipments hit their highest since November, and the US.

"Weekly US soft red winter net sales were reported at over 110,000 tonnes, the largest weekly sale in a month," Paul Deane at Australia & New Zealand Bank said, terming "positive" the trade news on both sides of the Atlantic.

"With 11 weeks remaining in the marketing year, total sales for the year could well reach 4m tonnes."

… but can it last?

In the UK, Jonathan Lane, trading manager at Gleadell, reminded of the conditions too in Europe, where "concerns over the winter freeze are now turning to the spring drought with parts of Western Europe still in need of increased moisture".

However, wheat's gains were capped by the weight of world supplies, with Mr Lane reminding of the news earlier in the week that of Russia declaring no need for export restrictions, besides the dynamic that is making "South American wheat competitive into North Africa".

"In addition, with the US weather showing a marked improvement ahead of corn planting, and winter wheat emerging from dormancy, prices remain under profit-taking pressure from fund liquidation based on current US weather and not European weather concerns," he said.

By Agrimoney.com

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