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Morning markets: 'sell the fact' trades come early to grains

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There was always a risk in the rise in grain prices, ahead of a key US Department of Agriculture briefing expected to cut ideas for South American corn and soybean production.

And that is, as Jon Michalscheck at Benson Quinn Commodities said, that "the trade could be setting up for a 'buy the rumour, sell the fact' scenario", common in financial markets, meaning that even data in line with expectations could prompt selling.

"Global buyers appear to be having gotten themselves covered out into the April-May time frame, so we could see a vacuum in terms of underlying support if the numbers don't generate a deeper bullish bias than is already in the market," Mr Michalscheck added.

Mike Mawdsley at Market 1 seconded the idea, saying: "Lower production in South America is expected. However, is it already being priced in, ie buy the rumour sell the fact?"

'Far cry from a crop failure'

Grain markets got a little of that "selling the fact" liquidation in early, on Tuesday, as ever the day for a turnaround in Chicago.

And why not, when Argentina and southern Brazil, whose dryness sparked concerns for corn and soybean crops, are now getting rains, to some extent.

"Rains are forecast for southern Brazil this week, but will remain below normal in many areas, particularly Rio Grande do Sul," Australia & New Zealand Bank analyst Paul Deane said.

While Celeres was the latest analysis group to cut forecasts for Brazil's soybean crop, the downgrade to 72.08m tonnes, from 74.4m tonnes, left it more upbeat than many other forecasters.

"A 72.08m-tonne Brazilian soybean crop is a far cry from a crop failure in this region and production reaching this level could allow Brazil to become the largest exporter of soybeans" after all, overtaking the US, Benson Quinn said.

More will be known, of course, as harvest progresses, with 6% of Brazil's crop in the barn so far, including 11% in the key state of Mato Grosso.

'An ulcer that has remained immune'

Another factor holding the markets back a touch was the macro-economic situation.

Chris Beauchamp, market analyst at IG Index, put it that "markets have been torn between two conflicting situations.

"On the one hand, we have a US economy that is seemingly recovering in an impressive fashion. On the other hand, we have Greece, an ulcer that has remained immune to every treatment the eurozone can throw at it."

Greek debt concerns remained alive enough to give a mixed performance to


, with Tokyo shares easing 0.1%, Sydney shares 0.5% and Shanghai stocks 1.7%, while other Singapore equities added 0.6%.



wobbled around last night's closing levels.

No spreading

Back in Chicago, this time all three major crops showed, small, losses.

Indeed, what was not evident, as yet, was the spreading which marked the lesion when, at Mike Mawdsley at Market 1 noted, "corn was the sell side of spreads. Buy soybeans or wheat, and sell corn", a factor he attributed to positioning ahead of the USDA report, on Thursday.

Wheat for March was 0.3% lower at $6.66 ¾ a bushel at 08:30 GMT, with March corn down 0.2% at $6.42 ¾ a bushel.

March soybeans eased 0.2% to $12.30 ½ a bushel.

Chart help

The more negative mood was evident in New York


too, which dropped 0.2% to 96.15 cents a pound for March delivery, following weakness in the fibre on the Zhengzhou exchange in China, the top producer, consumer and importer.

There, benchmark September cotton dropped 0.2% to 22,410 yuan a tonne.

However, New York raw


maintained its strength of the last session, adding 0.4% to 24.59 cents a pound for March.

The last session's gains took the sweetener squarely above its nine-day and 20-day moving averages, a big technical boost.

Furthermore, Kingsman, the influential consultancy, forecast a decline in the world sugar surplus to 4.7m tonnes in 2012-13, from 8.2m tonnes in 2011-12.

Olam forecast the surplus halving in 2012-13 from 9m tonnes in the current season.


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