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Morning markets: slow US sowings support some grain prices

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Could Tuesday bring relief to slipping agricultural commodity prices?

Not for old crop contracts, which maintained a slide amid signs of some easing up of the squeeze in demand.

That was evident, for some crops, in Monday's US weekly export inspections data, which for


, for example, were, at 5.5m bushels, down 50% for the week.


were down a more modest 5% to 34.6m bushels, but still some 9m bushels below what they need to average to hit US Department of Agriculture estimates for 2010-11, according to Benson Quinn Commodities.

There are doubts about profitability for corn ethanol manufacture too, after Todd Becker, chief executive of Green Plains Energy, said that there was "no clear visibility of acceptable margins", which had become "compressed", as at the same time last year.

'Opportunity just to exit'

And this when many investors have noted a background trend anyway of fund selling, if not all of long positions.

"Fund liquidation, whether it be from the longs or the shorts, continues," Benson Quinn said.

"The ramped up volatility has many heading to the sidelines and using first notice/delivery period [for the expiring May contracts] as an opportunity just to exit the market.

"Open interest declined sharply last week regardless of higher or lower trade."

Paris-based Agritel said: "The market is uncertain, with strong fundamentals on the one hand, but financials preferring the metals sector rather than agricultural commodities, on the other hand."

'Slowest pace on record'

At least new crop contracts had USDA data out late on Monday, showing disappointing planting progress by US farmers, to underpin them.

Corn sowings, for instance, were only 13% completed. Many analysts had expected plantings to be behind the normal pace of 40%. But not that much behind, foreseeing a figure of around 15-16%.

So even if planting conditions improve this week, as is expected, "the market may struggle to have 40% to 45% complete by May 15 at this rate", Benson Quinn said. Mid-May is seen as a sowing cut-off date, after which yield potential falls.

"The corn planting pace is the slowest since the data was compiled in the 1980s with Illinois, Indiana and Ohio not making progress last week," Ker Chung Yang at Phillip Futures said.

"Considering the continued slow pace of planting, Chicago corn may be able to post some gains today."

US snow



, spring sowings were even further behind, at 10% compared with an average of 43%, after continued wet weather in northern US (and Canada where sowings are only 2% completed, down from an average of 10% by this time).

"North Dakota had snow this weekend," Mike Mawdsley at Market 1 said.

And then there was a continued deterioration in the condition of US winter wheat, including in Kansas, the top state, besides the continued challenge to crops elsewhere.

In France, the second-biggest wheat exporter this season, "water stress remains a concern on most northern territory despite thunderstorms observed over recent days, that relieved crops in some locations", Agritel said.

"In Germany, rainfalls were slightly more abundant lately, while the situation is still a great concern in Poland."

New crop vs old

In terms of pricing, corn's showed the starkest old-crop, new-crop gap, down 0.5% at $7.31 a bushel for July, but up 0.8% at $6.66 ½ a bushel.

For wheat, September lost 0.8% to $8.28 ½ a bushel in Chicago, compared with a fall of 1.0% to $7.83 ¾ a bushel for the July lot, which covers some new crop.

Minneapolis, the home of trading in US spring wheat, the July lot fell 0.4% to $9.33 ½ a bushel, while the September contract (which some have joked may turn into an old crop lot because of the extent of planting details) eased 0.2% to $9.31 ½ a bushel.


remained a market follower, dropping 0.7% to $13.84 ¾ bushel for July and by the same to $13.64 a bushel for the new crop November contract.


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