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Morning markets:Paris pull frees crops from pre-data worries

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Dull trade had looked a fair bet for crops on Wednesday, it being the day before the US Department of Agriculture's Wasde briefing on crop supply and demand, a highlight of the farm commodities calendar.

"Wednesday could be shaping up to be another day of wait and see what is in Thursday's report," Dave Lehl at Benson Quinn Commodities said.

"Sideways to lower for Wednesday's trade seems like a likely scenario," he said, thinking particularly of wheat.

However, agricultural commodities did manage a clear trend, and an upward one, in both Chicago and New York.

Risk-on

As to why, a risk-on attitude in financial markets certainly helped, despite there being no resolution yet to the latest Greek debt furore.

The safe haven of

dollar

eased a touch, and

shares

rose more than 1% in Seoul and Tokyo, and 2.4% in Shanghai.

Brent

crude

edged 0.2% higher to consolidate its position above $116 a barrel, while London

copper

made ground too.

Wasde revisions

And Thursday's report is, after all, expected to bring downgrades to production numbers for Argentine and Brazilian

corn

and

soybean

crops.

For Brazil, the corn crop is seen pegged by the Wasde at 59.8m tonnes, a cut of 1.2m tonnes on the last number, and for soybeans at 71.7m tonnes, a 2.3m-tonne downgrade, according to a Dow Jones poll of analysts.

For Argentina, the corn number is expected to be cut 3.5m tonnes to 22.5m tonnes, and the soybean number by 2.0m tonnes to 48.5m tonnes.

"USDA could make upward revisions to US soybean exports to counter some of the production loss in South America, lowering US carryout," Australia & New Zealand Bank said.

The question is, of course, how much the market has already factored in.

Paris premium

But if they needed an extra reason to rise,

wheat

, which has taken over market leadership of late, got a pull from across the Atlantic, and Paris, where the grain has received a particular lift from cold in Europe and the Soviet Union, a major trading rival.

After all, the premium of Paris wheat over Chicago in front contracts is, at about $40 a tonne, "now starting to price France even further out of export grids", ANZ's Scott Briggs said, comments which followed talk that US soft red wheat sold to an "unknown destination" last week actually went to Egypt, taking trade from France's doorstep.

"The premiums may take a breather here, not necessarily falling a lot but not rallying again for a few weeks either."

Furthermore, "generally speaking, the strength in grains has largely been underpinned by Matif [Paris] wheat strength - strong Matif wheat means strong Chicago wheat, means strong Chicago corn, means strong Chicago soybeans..." Mr Briggs said.

And all three were certainly showing rises as of 08:45 GMT, with Chicago wheat up 0.7% at $6.67 a bushel, corn gaining 0.7% to $6.46 ½ a bushel and soybeans 0.9% to $12.43 ½ a bushel.

'Expectations for quick planting'

What seemed to be playing as a negative influence, but on further ahead contracts, were expectations of acreage expansion for US crops overall for 2012 harvests.

A Bloomberg poll showed US farmers intending to sow 226.9m acres (91.8m hectares) of corn, soybeans and wheat, the most since 1984, including a corn area up 2.6% at 94.32m acres, the biggest since 1944.

Soybean area was pegged at 75.3m acres.

A Reuters poll, also ahead of official USDA data out in two weeks' time, pegged corn area at 94.2m acres.

"A mild and dry winter has raised expectations for quick planting this spring," Lynette Tan at Phillip Futures said, and at a time when crop prices remain historically elevated.

Corn vs soybeans

Whatever, "traders are looking for big corn acres", Mike Mawdsley at Market 1 said, flagging that selling the new crop December corn lot had become "popular".

The contract actually edged 0.2% high to $5.76 ½ a bushel, but that was not enough to close its discount to the March lot, nor keep up with new crop November soybeans.

They added 0.6% to $12.48 ¾ a bushel, taking the ratio between the two lots to 2.17, and tilting back towards incentivising farmers to plant soybeans rather than corn.

Australia fears ease

The positive mood spread too to New York raw

sugar

, which gained 0.9% to 24.63 cents a pound for March, and

cotton

up 0.8% at 95.36 cents a pound, despite waning ideas of losses in Australia to floods.

New South Wales, while raising fears for cattle and sheep farms, saying that "there are many thousands of stranded stock in water right across" northern areas of the state, removed an observation of flooding to crops.

And Cotton Australia said it still expected a national cotton harvest of about 5m bales.

Higher prices on China's Zhengzhou exchange helped, as did ideas that in sugar, near-term supplies remain tight.

By Agrimoney.com

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