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Morning markets: sugar rides out soft start for crop markets

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Sugar

, at least, managed to overcome the downbeat mood on financial markets.

New York raw sugar for March stood 0.7% higher at 25.95 cents a pound at 08:45 GMT, having touched 26.23 cents a pound earlier, the highest for a spot contract since October.

The sweetener is being boosted by, as Sucden Financial put it, "expectations that a potential receiver is looking to take the March [contract] on" – that is, that one trading house is to take receipt of a large amount of the sweetener delivered against the lot, which expires on February 29.

Such signs of demand are helpful for the whole complex. But with the squeeze identified in the March lot, the May contract could only add 0.1%, to 24.74 cents a pound.

Rising crude

Other agricultural commodities found early headway more difficult.

Indeed, the default move for risk assets was down, with concerns revived about Greece's implementation of austerity measures promised to secure a E130bn bailout package. Fitch Ratings added to jitters by cutting Greece's credit rating again, this time to C from CCC.

And disappointment at Wednesday's data showing shrinking eurozone and Chinese manufacturing activity also hung around.

Meanwhile, the rising price of

oil

, highlighted by a warning from Goldman Sachs of a potential spike, as Brent crude returned above $120 (now $123) a barrel, also rattled nerves.

Many Asian

stockmarkets

struggled, with Seoul and Singapore stocks shedding more than 1%.

Switch back to US?

Rising oil has a more nuanced impact on crops, threatening broad demand for raw materials, by virtue of higher energy bills, but also boosting the appeal of crop-based fuels, such as

corn

.

And the grain in Chicago is receiving support too from ideas that the foul-up in former Soviet Union logistics caused by cold weather is continuing to delay shipments, boosting the appeal of US alternatives.

"Chatter from overseas traders that the Ukraine is late on a sizeable portion of the 1.5m tonnes of corn that Japan bought from them for January-February shipment may have caused them to come back into the US or South American market for additional tonnage," Jon Michalscheck at Benson Quinn Commodities said.

That said, Ukraine's State Food and Grain Corp on Thursday predicted a bright future for the country's corn exports, saying they will rise to 14m-15m tonnes next season, from 12.5m tonnes in 2011-12.

Investor confusion

And overhanging all this is the prospect later today of the US Department of Agriculture revealing its first firm forecasts for US crops in 2012-13, after the outline estimates, based on November calculations, unveiled last week.

While expectations of a strong corn acreage number, and weak

soybean

figure, has helped give the oilseed the advantage for much of the month, some of that sentiment has disappeared with some of the wilder forecasts for corn sowings, of 97m acres or more

Indeed, a popular "buy soybean, sell corn" spread went into reverse in the last session, when funds were seen buying 10,000 contracts in the grain, after selling 12,000 on Tuesday.

Mr Michalscheck said: "It would appear there are a lot of people in the trade that aren't sure whether they want to be long or short ahead of the release of the USDA data," which will be released over the two-day conference, starting today.

Battle for acres

Some of the retreat in spreading was evident early on Thursday too, when March corn edged 0.1% higher to $6.38 ¾ a bushel in Chicago, while March corn eased 0.1% to $12.70 ¾ a bushel.

Signally, corn regained the upper hand in the new crop battle too, adding 0.2% to $5.65 ¾ a bushel for December delivery, while November soybeans dropped 0.1% to 12.62 ½ a bushel.

That trimmed the soybean: corn ratio, seen as a key indicator of how significantly farmers will plump for the grain or oilseed in their sowing plans, to 2.23, if still in territory seen favouring corn.

Soybeans are also facing some pressure from South American rain, refreshing dry crops in southern Brazil, if posing a threat to the ongoing harvest further north.

Wheat sinks

Weather has also turned more helpful to farmers than prices in wheat too, with dry areas shrinking in the south, where winter wheat seedlings got off to a slow start, and north, where more moisture is needed in many areas for spring sowings.

And, with world stocks forecast ending 2011-12 at a record high, wheat sank despite further evidence of demand.

Overnight news saw Iraq buy 400,000 tonnes of Canadian wheat, and Spain purchase 30,000 tonnes of US soft red winter wheat, the type traded in Chicago.

Furthermore, Bangladesh and Tunisia are both running tenders for 50,000 tonnes of wheat, and this after a spate of purchases by the likes of Algeria, Egypt and Saudi Arabia earlier in the month.

Chicago wheat eased 0.2% for March delivery to $6.43 a bushel.

Cotton slump stalls

Elsewhere, New York

cotton

at least held its ground, after a sharp decline in the last session blamed on the weak factory data from China, the top importer and consumer of the fibre, combined with weak charts.

Indeed, a more modest 0.8% drop in Zhengzhou cotton overnight helped New York's March lot edge 0.03 cents higher to 88.60 cents a pound.

And

palm oil

for May was 0.2% higher at 3,255 ringgit a tonne in Kuala Lumpur,

Strong prices of crude, which palm oil as a biofuel feedstock correlates with, and ideas of improved Malaysian shipments helped the vegetable oil.

By Agrimoney.com

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