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Morning markets: soybeans, cotton overcome oil price nerves

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Agricultural commodities needed a bit of edge, a bit of a story, to raise themselves above what was a boggy start to the week for financial markets.

Cotton found some, after Friday's firm US export data, showing weekly sales of 185,000 running bales and 326,000 bales in actual shipments.

Furthermore, there is talk that US mills are operating with low inventories, and a strategy of dipping into the market on breaks, so putting a lid on bears' enthusiasm for pressing prices lower.

New York cotton for March added 0.6% to 90.35 cents a pound as of 08:30 GMT, with the better traded May lot gaining 0.8% to 90.87 cents a pound.

Export demand

In Chicago,

soybeans

maintained their market leadership, after their own strong export sales data, of 1.16m tonnes of old crop and 2.87m tonnes of the next one, backed by strong Chinese buying.

"Weekly exports were better than expected," Kim Rugel at Benson Quinn Commodities said.

While the pace of export sales is still running well behind that of last season, it has "improved remarkably" in recent weeks,

Furthermore, the oilseed emerged with one of the more bullish outlooks out of a generally bearish set of US Department of Agriculture forecasts on Friday for US crops in 2012-13, with inventories seen falling by one-quarter to 205m bushels over the season after drought-sapped production in rival South American exporting countries.

Soybeans vs corn

Technically, Chicago contracts also had the fillip of settling above 200-day moving average lines on Friday for the second time since September, closing indeed at their highest levels since September too.

The March contract built on this by adding 0.4% to 12.82 ¾ a bushel on Monday, with the better-traded May lot gaining 0.3% to $12.90 ¾ a bushel.

The new crop November contract lagged a little, gaining 0.3% to $12.74 ¼ a bushel. But it was enough to make more ground on new crop December corn, and improve the incentive for farmers to plant the oilseed rather than the grain this spring.

The soybean: corn ratio has now moved to 2.30, from 2.11 at the start of the month.

In insurance terms, with payouts for next season set at the average prices of the crops this month, soybean prices have averaged a little under $12.49 a bushel as of Friday's close, and corn a little under $5.79 a bushel, for a ratio of 2.20.

'Corn prices will fall'

Many other commodities had more trouble braving a slightly negative backdrop in broader financial markets, thanks to fears for oil prices.

The safe haven of the

dollar

added 0.2%, while shares fell 0.1% in Tokyo, 1.4% in Seoul and 0.9% in Sydney.

Corn futures furthermore continued to be depressed by Friday's slightly disappointing export sales data, at 841,000 tonnes, as well as USDA expectations of a steep rebuild of US inventories in 2012-13.

The USDA's forecast of a 164-bushels-per-acre corn yield this year was "more than enough to squash any hope of higher grain prices by December 2012", Paul Deane, at Australia & New Zealand Bank, said.

If a USDA forecast is realised that such a strong yield will foster a doubling in corn stocks to 1.6bn bushels, "US corn prices will fall this year", Luke Mathews at Commonwealth Bank of Australia said.

As of 08:40 GMT, Chicago's March lot was down 0.4% at $6.38 a bushel and the May contract down the same at $6.41 ¼ a bushel. The December contract dropped in line to $5.55 ¾ a bushel.

Bearish speculators

These falls were bigger this time than in

wheat

, which too saw the USDA factor in a domestic stocks rebuild over 2012-13.

Still, there are some questions over the estimates. "USDA is using a 44.5 bushels-per-acre yield and total production of 2.165bn bushels, which is more than enough", Benson Quinn said.

And, with regulatory data released on Friday showing speculators already having a net short position in Chicago wheat, there were questions over how much further unfulfilled selling pressure remained.

Large net short positions open up the risk of price spikes on bullish news, as fast money rushes to cover these holdings.

14-month low

Besides, there are still signs of strong demand around, with Algeria on Friday purchasing 300,000 tonnes of wheat, albeit believed from Europe and South America rather than the US, which has been winning substantial export business of late.

Chicago wheat for March eased 0.2% to $6.39 ½ a bushel, and May wheat 0.1% to $6.40 ¾ a bushel.

Minneapolis spring wheat for March once again did worse, falling 0.7% to$7.81 ¼ a bushel, the lowest level for a spot contract since December 2010, on decent prospects for spring sowings in both the US and Canada.

By Agrimoney.com

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