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Morning markets: waning SA rain hopes put crops on offensive

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The weekend was not kind to Argentine growers.

First, it delivered another round of hot temperatures, there and in southern Brazil and Paraguay too, further stressing

soybean

and, in particular,

corn

crops.

On Saturday, "temperatures were extremely hot again," David Tolleris at WxRisk.com said.

"Readings ranged from 35 to 40 degrees Celsius, or 98 to 105 degrees Fahrenheit. Only over Buenos Aires and Entre Rios did maximum temperatures not reach at least 36 Celsius/98 degrees Fahrenheit."

Not as wet

Secondly, the prospects of rain for this week diminished.

"Based upon the Sunday afternoon model data, is safe to say that the GFS [weather model] is backed off of the extremely heavy rain amounts for central, eastern and northern Argentina" brought by a cold front coming in tomorrow.

There will be rain but, according to the model, bringing "60% coverage of 0.50-2.00 inches with the best rains falling over [Argentina's] Buenos Aires province, far southern Cordoba and far southern Santa Fe", well below levels expected last week, Mr Tolleris said.

Furthermore, weather models concur on a new so-called "heat dome" coming into northern Chile, Bolivia and northern Argentina from Friday.

Prices rise

The result was that Chicago grains made a firm start not afforded to all risk assets, which were sunk by concerns about Europe's debt problems, heightened by the downgrade in Hungary's debt rating to "junk" and weak eurozone retail sales data.

Shares

fell in major Asian markets, with Tokyo's Nikkei index ending down 1.2%. London

copper

eased 0.7%.

But corn rose 1.2% to $6.51 a bushel in Chicago for March delivery, as of 08:35 GMT, springing off the nine-day moving average line at which it closed the last session.

Soybeans for March added 1.0% to $12.08 ½ a bushel, climbing back over the lot's own nine-day moving average, at $12.07 a bushel.

Moving averages are much watched by many technical investors as signals of future price movements, with moves through these points seen likely to herald further momentum in that direction.

On Friday, all soybean lots closed below the 10-day moving average (which some investors prefer to the nine-day) for the first time in three weeks.

Chinese purchases

Indeed, the weather fears made up for some of the disappointment on Friday at disappointing US weekly export sales data, when the only 307,000 tonnes of corn were shifted (albeit during a holiday period), compared with expectations of at least 350,000 tonnes.

The silver lining to this cloud was "China being on the buy side", Jon Michalscheck at Benson Quinn Commodities said, with a purchase of 184,200 tonnes, of which 180,000 tonnes was switched from the unknown category.

"They were reported to have lifted 182,700 tonnes for the week as well," important given that many see growing Chinese demand as a major prop to corn prices in the future.

"Both sides of the trade have to be agonising over whether China will continue to be an importer once they have used up their allocation of sales to unknown commitment that they reportedly bought back in November," Mr Michalscheck added.

"At the current pace we should know the answer sometime in late February to early April.

'Pretty darn bleak'

Wheat's

weekly US export sales were soft too, at 168,000 tonnes, less than half the level forecast by some analysts.

Still, the grain revived on Monday, helped by the rise in fellow grain corn, which, atypically, trades at a premium, besides its sensitivity to the broader market trend.

The large net short position that speculators hold in Chicago wheat is seen as making the grain vulnerable to a short-covering rally, in turn making investors nervous when market direction turns upward.

Chicago wheat for March added 1.6% to $6.35 a bushel.

Minneapolis hard red spring wheat, however, continued a downward trail, falling 0.1% to $8.00 a bushel for March delivery, as investors continue to liquidate spreads with Chicago and Kansas wheat.

Minneapolis wheat has poorer technical too. "On the daily chart, things look pretty darn bleak for the Minneapolis Mar contract, if it trades below the July 12 low of $7.89 ½ a bushel," Benson Quinn's Brian Henry said.

Chart fillip

On other markets, New York

cotton

, built further on its climb above the 50-day moving average, adding 0.6% to 96.41 cents a pound for March delivery.

Cotton futures on the Zhengzhou exchange in China, the top producer, consumer and importer of the fibre, helped by firming too, by 0.7% to 20,985 yuan a tonne for May delivery.

However,

palm oil

dropped 0.2% to 3,204 ringgit a tonne in Kuala Lumpur, having outperformed Chicago oilseeds in the last session.

By Agrimoney.com

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