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Morning markets: soybeans struggle as harvest pressure tells

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The risk off, risk on, risk off, risk on cycle turned, very mildly, back to "on" on Thursday, helping some assets recover a little lost ground.

But agricultural commodities continued to find the going hard, with uncertainties ahead of Friday's US Department of Agriculture report on US crop inventories, besides it approaching month and quarter end, often periods of fund selling, adding to the obstacles.

S

oybeans

early on fell to a 2011-low of $12.09 ¼ a bushel for November delivery, continuing to buckle under harvest pressure too.

Indeed, Luke Mathews at Commonwealth Bank of Australia highlighted the negative stimulus of "forecasts for improving harvest weather in the US over the next week".

'All over the map'

Sure, the trend in yield talk has turned downwards, after a not-as-bad-as-expected start.

"Yield reports have been all over the map as harvest begins in earnest in the west," Kim Rugel at Benson Quinn Commodities said.

"The early planted beans on the quality ground have been yielding better than last year but as the combines move into the later plantings or the wetter low ground yields have fallen significantly."

Most analysts "continue to confirm a lower yield outlook from US Department of Agriculture's August estimate" of 41.8 bushels per acre.

'Well below seasonal pace'

But bears have support from demand concerns. Rumours of Chinese buying this week have yet to be confirmed through the USDA's daily reporting system.

"So far sales are well below seasonal pace," Rugel said, although there is some expectation of a pick-up in latest weekly US export sales data later, expected to show shipments at 550,000-750,000 tonnes, up from 404,000 tonnes last time.

There is also uncertainty ahead of Friday's much-anticipated US crop inventory data to deal with, expected to show soybean stocks ending 2010-11 at 225m bushels, with some analysts forecasting a bigger figure which would favour lower prices.

Chicago's November soybean lot stood 0.2% lower at $12.21 a bushel as of 07:20 GMT (08:20 UK time).

"Soybeans can find no buyers," Mike Mawdsley at broker Market 1 said.

'It remains too dry'

Wheat

made better use of a better macro picture reflected in a 1.0% rise in Tokyo

shares

, a 2.7% increase in Seoul stocks and a 0.2% dip in the

dollar

against a basket of currencies.

Brent

crude

edged 0.1% higher nearly back to $104 a barrel.

Wheat is being supported not just by a short-term lack of farmer selling of spring wheat crop, which sent Minneapolis spring wheat for December jumping 1.9% to $8.77 ¼ a bushel.

(The March contract gained a more modest 0.6% to $8.36 ¾ a bushel.)

There are also weather concerns.

"It remains too dry in US Great Plains and portions of the former Soviet Union region, with no relief expected in the immediate period," CBA's Luke Mathews said.

Crop downgrade?

Traders have prepared for a dip in US weekly wheat export sales too, estimating the figure will come in at 450,000-550,000 tonnes, down from 680,000 tonnes last time.

And, as Lynette Tan at Phillip Futures in Singapore noted, "the market generally expects a slight reduction in USDA's production estimate, also out Friday.

"Poor yields in the northern US spring wheat belt could prompt the USDA to cut its estimate of overall 2011 US wheat production to the lowest level since 2006."

Chicago's December wheat contract added 0.5% to $6.41 ¾ a bushel.

(Also, potentially to impact the market later on are the results of the latest tender by Egypt, the top wheat importer, trade which Russia has gained a strong grip on, but you never know…)

End users buying?

Wheat's gain allowed it to rebuild more of its usual premium over

corn

, which earlier dropped to $6.23 a bushel, the lowest for a spot contract since early July.

There is actually some pent-up bullish sentiment around, with comments from the UN Food and Agriculture Organisation, noting the impact of falling prices in stimulating demand of a grain in short supply, striking a chord with many observers that Agrimoney.com is speaking too.

US ethanol plants, for instance, are showing healthy margins, and hog farmers too. Indeed, data late on Wednesday showed the US hog herd growing, year on year, over the summer by more than traders had expected.

And technically, the nine-day relative strength index has fallen to the low 20s, an indicator of an "oversold" market, potentially supporting buying.

'A bearish sign'

But a big chart factor stands against corn too, with the December lot closing the last session back below its 200-day moving average.

"That's a bearish sign," Mr Mawdsley said, while adding that the grain is in a "good value area, unless the USDA says we have more corn than we are thinking".

December corn bounced in and out of negative territory before reaching $6.31 ¾ a bushel, up 0.2% on the day.

Running out of tread

Elsewhere,

rubber

fell below 300 yen a kilogramme again in Tokyo to a one-year low, before the benchmark March lot recovered some ground to finish at 301.00 yen a kilogramme, down 2.8% on the day.

The tyre ingredient is being dragged lower by the broad move down in prices of oil, the raw material for synthetic alternatives, and by idea of what renewed economic decline might mean for vehicle demand.

And

palm oil

touched an 11-month low of 2,850 ringgit a tonne in Kuala Lumpur, before rebounding a little to 2,889 ringgit a tonne, down 0.7% on the day, amid concerns that China may have completed its buying ahead of National Day celebrations.

By Agrimoney.com

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