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Morning markets:corn rally falters as next set of data nears

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So will Wednesday be the day that corn's rally succumbs to selling pressure?

There has been a broadly-expressed unease at the rate of the grain's gains on its way to a record high in the last session – up by more than $1 a bushel, or 16%, in less than a week.

Could yesterday's interest rate rise by China, the fourth since October, prove the catalyst for a dose of profit-taking?

"We expect that the Chinese rate hike may raise concern about rising inflation and slower economic growth," Ker Chung Yang at Phillip Futures in Singapore said.

"As China's corn consumption is becoming more crucial for US corn trade, the rate hike could halt the rising trend of Chicago corn. The bullish momentum for corn may take a pause [today]."

After all, high hopes for Chinese corn imports were expressed on yesterday, both by the US Grains Council and JP Morgan, which pegged them at 5m tonnes this year.

Data on Friday

There were certainly signs of weakness in early deals, but not of a full correction, with the grain continuing to gain support from last week's data showing tight US inventories.

Farm officials in America, the top producer and exporter of the grain, on March 31 pegged domestic stocks 170m bushels below market estimates, meaning inventories already expected to end 2010-11 at a 15-year low look likely to get tighter still.

On just how much tighter, more will be known on Friday, when the US Department of Agriculture releases its latest monthly flagship Wasde report on global crop supply and demand - another reason for a bout of market nerves.

Benson Quinn Commodities was among the latest to unveil estimates for what the figure for US inventories at the end of 2010-11 will show – 565m bushels, compared with a current USDA figure of 675m bushels.

'Higher prices to come'

And there is still plenty of talk around that, while the grain may suffer a short-term sell-off, it still has ultimately higher to go.

"The need for demand rationing means that higher prices are probably still to come," Luke Mathews at Commonwealth Bank of Australia said.

At Market 1, Mike Mawdsley said that, on a technical basis, Tuesday's "close over $7.65 a bushel suggest a run to $8.00, or more".

Around $7.97 a bushel is the 138% mark for the corn's rally, a target for followers of Fibonacci ratios.

May corn actually stood at $7.60 a bushel as of 08:30 am UK time (07:30 GMT), down 0.9% on the day, with the new crop December lot down 0.7% at $6.42 a bushel.

Beans bounce

This made corn the weakest of the big three Chicago crops, an unusual position of late, with soybeans and wheat making up some of the ground lost in the last session.


were 0.8% higher at $13.84 ½ a bushel, winning one technical battle, in staying above the nine-day moving average pitch where it closed the last session, and potentially seeing victory in another, with the 50-day line, which might be expected to curtail upward movement, at $13.83 a bushel.

Last week's USDA data was, on the face of it, bullish for soybeans too, but sentiment over the oilseed has been depressed by a dearth of Chinese import orders of late, and by expectations that Friday's Wasde will lift forecasts for world production.

Informa Economics on Tuesday forecast a 600,000-tonne increase to 263.5m tonnes in the USDA figure for world soybean production, with the estimate for 2011-12 put at 263.7m tonnes.

Informa puts the 2011-12 US soybean crop at 3.351bin bushels, a touch higher than last year's 3.329bn.

'Very nervous'


gained support in part from talk of dryness on both sides of the Atlantic.

"Markets are still very nervous due to water stress in the producing regions of the North of European Union and the US," Paris-based consultancy Agritel said.

However, there were also eyebrows raised at the closeness – just 19.5 cents a bushel lower – that Chicago corn was trading at in relation to wheat as of last night's close, a factor which might be encouraging the brave to try "buy wheat, sell corn" spreads.

Chicago's May wheat contract added 0.5% to $7.90 a bushel, re-establishing a near-30-cent-advantage over its grain peer.


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