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Morning markets: technical signs help corn start brightest

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Once again, grains started brightly, but whether they will be able to hang to gains…

The broader market mood was somewhat neutral, as a small boost wore off from comments by Ben Bernanke, the head of the US Federal Reserve, that kept the door open for a further round of monetary easing.

Asian share markets closed little changed, as was the

dollar

at 08:45 UK time (02:45 Chicago time).

So a firm performance by agricultural commodities stood out, especially in grains, given their inability of late to hold on to buyers.

'Fallen out of favour'

Paul Deane at Australia & New Zealand Bank said: "

Corn

has certainly fallen out of favour with speculative funds, particularly post the Prospective Plantings report," the US Department of Agriculture's March 30 briefing on US farmers spring seed plans.

And this despite sales of more than 1m tonnes of corn to "unknown", presumed China, this week, more than the country bought in the whole of 2010-11.

"With over 1m tonnes of corn sales not enough to get the market excited, it seems the US 2012 corn crop is being viewed as likely to be large enough to rebuild stocks to comfortable levels," Mr Deane said.

At Benson Quinn Commodities, Jon Michalscheck flagged the importance of an early sowing season in pegging back futures, in bringing the harvest forward and getting new crop supplies online more quickly than normal

"With the market still attempting to factor in the possibility of some 750m-1.0bn bushels of corn being harvested early this year it's understandable that they weren't going to get too excited about 40m or 50m bushels", or 1m-1.3m tonnes, of exports.

Chart signals

Still, there is nothing like a surplus of bearish talk to help Chicago prices. Especially when they rose on China's Dalian exchange, by 0.6% to 2,426 yuan a tonne for September delivery, and when technical factors are signalling some prospect of a bottom being reached.

Mike Mawdsley at Market noted that, while corn did finish the last session lower, "support did hold, for now".

For the May contract, "$5.99 ½ a bushel is the key to hold on a close" to prevent the risk of encouraging further fund liquidation.

For upward movement, the level of $6.25 a bushel looks a key technical ceiling to take out.

"Since closing below $6.25 a bushel, we have tested it but failed to close over it. We may just stage range-bound until more is known about this year's crop," Mr Mawdsley said.

Corn vs soybeans

May corn was trading towards the top of the range, at $6.16 ¾ a bushel, up 0.9% on the day, with the better-traded May contract adding 0.9% to $6.06 ½ a bushel.

The new crop November contract was up too, by a modest 0.3% at $5.39 ¾ a bushel, but pulling back some ground against new crop November

soybeans

, their rival in what remains of the battle to win ground in farmers' spring sowing schedules.

And after all, soybeans to appear to have made up ground in acreage terms.

Mr Mawdlsey flagged "lots of chatter about some corn acres being switched to soybeans."

At Allendale, Paul Georgy said: "We have talked to many producers in the US over the last few days that are going to plant more soybeans than earlier planned," while adding that "this increase will come from many different crops not just corn".

'Technicals and the cash market'

In fact, new crop November soybeans fell 0.2% to $13.67 ¼ a bushel, underperforming old crop contracts, which overcame early weakness to post small gains.

The July contract added 0.3% to $14.78 a bushel, with the May contract up 0.3% from last night's three-and-a-half year closing high to stand at $14.80 ¼ a bushel.

Besides the continued downgrades to South American crops, "technicals and the cash market are still offering support to the soybean market", Brian Henry at Benson Quinn said.

"A trade below initial support at $14.58 ¾ a bushel in July soybeans signals that near-term top may have been made.

"But the current upward momentum is expected to remain intact unless the July contract trades below the $14.39 a bushel level."

'Improved seasonal conditions'

Wheat

, meanwhile, sided with fellow grain corn, as it has tended to of late, with its own supplies already far more ample, and with prospects improved for the next harvest too.

"Key wheat growing regions in Europe, China and the former Soviet Union have recently observed improved seasonal conditions," Luke Mathews at Commonwealth Bank of Australia said, noting that ideas of frost for the US soft red winter wheat have receded too.

Still, there is some demand around, with Saudi Arabica tendering for 440,000 tonnes of hard wheat, and Japan seeking 106,000 tonnes.

Chicago wheat gained 0.7% to $6.20 ½ a bushel for May, and 0.5% to $6.29 ¾ a bushel for July.

Data later

As for whether the rise can continue, much may depend on US weekly export sales data later, expected to show wheat at 350,000-700,000 tonnes, old crop and new combined, compared with 442,000 tonnes the week before.

For corn, the figure is expected at 550,000-1.0m tonnes, which would be a big improvement on the previous sub-300,000-tonne figure.

Soybean export sales are expected at 800,000-1.3m tonnes, compared with 1.22m tonnes last time.

Margin raises

Export sales figures could also have a bearing on the

cotton

market, which also got off to a bright start, with New York's July contract up 0.7% at 91.40 cents a pound.

Note that that exchange is, as of Friday, raising margins for speculators in cotton, if by a modest 3%, meaning that they have to put down more cash to support positions.

For

sugar

, the margin raises are more severe, of more than 20%, a factor which would appear to favour lower prices, given that speculators have a reasonably large net long position in the sweetener to maintain.

Still, the July lot added 0.2% to 21.80 cents a pound.

The exchange cut margins on cocoa and orange juice.

By Agrimoney.com

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