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Morning markets: rapid US corn sowings weigh on grains

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Just how much

corn

can US farmers plant in a week?

Investors, having overestimated the pace of US sowings earlier last month, found they had underestimated the pace by a distance in the latest week.

US growers sowed 25% of the crop in one week, taking the total planted to 53%, according to the US Department of Agriculture's weekly Crop Progress report.

That was well above the total seeded area of some 43% of expected acres that investors had forecast and brought the story of rapid planting progress making for higher yields, so meaning a bumper US corn crop this year, right back into focus.

"Every one of the 18 states that are estimated in the report are ahead of their five-year average progress for this point in the season," a report from Paragon Economics and Steiner Consulting noted.

Strong China data

Macro markets were mixed – those that were open, with May 1 a national holiday in many countries, including China, France and South Korea.

Stocks

tumbled 1.8% in Tokyo, although added 0.8% in Sydney after Australia's central bank surprised investors by cutting its interest rates by 0.5 points, to 3.75%, more than investors had expected.

And some assets, such as

copper

, managed to find some support from data showing the Chinese manufacturing sector at its healthiest in more than a year, according to a purchasing managers' index, which rose to 53.3 last month, above a figure of 53.1 for March, and remaining higher than the 50 level which signals expansion.

New month…

Indeed, there is always the hope for commodity bulls of the beginning-of-the-month buying often noted in the asset class.

"Tuesday is a new month, and traders will be watchful to see if new fund money it put to work in the grains," Mike Mawdsley at Market 1 said.

But not in Chicago as of 09:00 UK time (03:00 Chicago time), as investors focused on the fast pace of corn sowings, which was led by a bravura performance by Iowa growers.

New crop corn for December dropped 0.5% to $5.40 ½ a bushel.

Among the old crop lots, corn for May fell 0.7% to $6.55 ¾ a bushel, losing some of its premium over the better-traded July contract, which fell 0.3% to $6.32 ½ a bushel.

'Good rains'

Falling corn was one depressant for wheat, but there were others too, with US spring wheat sowings continuing apace, hitting 74%, up 17 points over the latest week.

Furthermore, the condition of America's winter crop showed a small improvement, to 64% in "good" or "excellent" condition, up one point on the week, and despite a slight deterioration in Kansas, the top wheat producing state.

And investors are taking a bearish view for now of the rains which, while landing flooding on many growing areas, with more than eight inches of rain recorded in northern Oklahoma, have brought more modest and welcome moisture to many areas, including dry spring wheat states.

"Spring wheat country got good rains over the weekend, with western areas getting anywhere from 0.5 -1.5 inches," Jonathan Watters at Benson Quinn Commodities said, terming this "important moisture for much of the region".

Chicago wheat for July fell 0.6% to $6.50 ½ a bushel, surrendering the 50-day moving average regained in the last session for the first time in nearly a month.

The July contract in Kansas, whose hard red winter wheat is coming under scrutiny this week from a much-watched crop tour, fell 0.4% to $6.59 ¼ a bushel, just holding above its 20-day moving average at $6.54 ¾ a bushel.

Best of a bad bunch

That left

soybeans

back as the top performer among Chicago's big three, but only by virtue of falling less far.

The crop progress report was actually neutral for the oilseed, showing seedings 12% completed, in line with market expectations.

But a bull market - as soybeans have after finishing the last session above $15 a bushel for the first time since 2008 (and only the third monthly close ever above this mark) – needs feeding with bullish news, traders say.

Especially when speculators hold a record net long in the oilseed, positions which will be unwound at some stage, bringing selling pressure.

Soybeans for July stood 0.4% lower at $14.99 ¼ a bushel, if closing some ground on the expiring May lot, which fell 0.6% to $14.94 ½ a bushel, still feeling extra pressure from surprise deliveries against the contract.

'Making strong progress'

Nor did soft commodities start on tremendous form, with

cotton

falling 0.4% in New York to 89.07 cents a pound for July delivery, and 0.6% to 86.42 cents a pound for the new crop December lot, after another week of decent sowings by US growers.

"US cotton producers are making strong progress with this season's planting campaign", Luke Mathews at Commonwealth Bank of Australia said, noting that 26% of the crop has been planted, up from an average of 19%.

And raw

sugar

renewed its slide, with the July contract, on its first day as New York's spot lot, falling 0.9% to 20.93 cents a pound, less than half a cent from the lowest levels for a benchmark contract since 2010.

Archer Consulting cut its estimate of cane crush in Brazil's key Centre South region by 4m tonnes to 508m tonnes. But it raised its estimate for sugar output to 32.5m tonnes, citing higher sucrose content, in what is becoming something of a theme.

By Agrimoney.com

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