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Morning markets: proft-taking saps crops in US, if not China

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A touch of exhaustion, or vertigo, set in on financial markets on Friday.

It wasn't just agricultural commodities which suffered a bout of profit-taking at the end of the week which has seen prices of

corn

and

soybeans

hit multi-month highs, besides the rise in Wall Street

shares

to four-year highs.

Stocks edged lower in Seoul, Singapore and Sydney, and managed a gain of less than 0.1% in Tokyo.

As an extra sign of a more risk-off feel, the safe haven of the

dollar

rediscovered forward gears, if adding only 0.1% against a basket of currencies.

'Phenomenal exports'

The turn more cloudy in the financial market weather wasn't enough to stop all agricultural commodity futures rising.

New York

cotton

for May added 0.1% to 87.45 cents a pound as of 08:50 GMT, continuing to gain strength from US export sales data on Thursday which showed shipments of 358,758 running bales, the highest figure since November, when China's purchases of US cotton for stockpiling spiked.

The "phenomenal" data "certainly say a lot about the competitive position of US cotton", Mike Stevens, the Louisiana-based cotton analyst, said.

A breakdown of data used to create the Cotlook A index reveals that "offering prices of both Texas and Memphis/Eastern styles of cotton the last two weeks have shown to be very competitive, particularly with offers of Indian cotton being only nominally quoted".

Indian cotton exports remain banned, bar for shipments cleared before the curbs came into force earlier this month.

'Concerns will escalate'

But profit-taking took a bite out of New York raw

sugar

, after the 4% gain of the last session left the May contract with its second-highest finish since October.

The lot retraced 1.4% to 25.15 cents a pound.

Not that all analysts believe the game is up for firm sugar values.

"Rainfall in Brazil's key cane producing region – Sao Paulo – has been consistently below average throughout the monsoon season," Paul Deane at Australia & New Zealand Bank said.

"Further, the two-week outlook is for below-average rainfall. Time is running out for the crop given the monsoon starts to withdraw from this region within the next month.

"We believe weather concerns regarding Brazil's cane crop will escalate in coming months, adding to upside risks."

'Extremely overbought'

And the temptation to cash in nibbled at Chicago crops too.

"The soybean market is extremely overbought. There is a strong possibility of a profit-taking event developing prior to the weekend," Benson Quinn Commodities said, if acknowledging that "the rest of the technical structure looks pretty supportive" for the oilseed.

Hopes for imports from China received a mixed signal from the Dalian exchange, where soybeans closed up 0.1% at 4,398 yuan a tonne for May, the highest finish for a spot contract since August 2008, but a 0.1% drop to 4,503 yuan a tonne for the better-traded September contract.

Chicago soybeans for May eased 0.1% to $13.67 ¼ a bushel.

Fresh record high

The Dalian sent a stronger signal to corn traders, raising the price of the May contract to a record 2,505-yuan ($396) a tonne at one point, climbing over the equivalent of $10 a bushel.

The better-traded September lot finished 1.3% higher at 2,487 yuan a tonne, with prices stoked by reports of the lack of success of Chinese authorities in building stocks from domestic supplies.

All this, of course, adds to the appeal of buying US supplies, which typically work out cheaper, particularly for processors exempt of Chinese VAT.

Indeed, Shang Qiangmin, director of the China National Grain and Oils Information Centre, has acknowledged that China will likely step up corn imports thanks to the competitiveness of US prices.

Chicago corn for May edged 0.1% lower to $6.68 ¼ a bushel, although signally the new crop December lot fell 0.4% to $5.70 ¼ a bushel amid growing ideas of a good US weather, to speed spring plantings.

Crop concerns

Wheat

, which lacks the support of Chinese import buying, and indeed showed up poorly in Thursday's US export sales data, unlike corn and soybeans (and cotton), dropped further, but still by a modest 0.2% to $6.63 ½ a bushel.

"Who wants to sell wheat if corn and soybeans continue the rally into next week," asked Benson Quinn said, adding too that "concern over the condition of the European Union and Black Sea crop seems to be growing".

Strategie Grains on Thursday added its voice to commentators worried about the impact on western European crops of a lack of rain, as it belatedly caught up with winterkill losses too.

Meanwhile, SovEcon, the Moscow-based consultancy, expanded on ideas of some winterkill losses in Russia too, forecasting the winter wheat harvest this year at 34m tonnes, down from 34.7m tonnes in 2011.

By Agrimoney.com

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