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Morning markets:crops brace for month, quarter end, key data

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The end of the month is viewed as a tricky time for agricultural commodity markets at the best of time, encouraging a round of tidying up of fund positions.

But this end of month has extra significance. It is the end of the quarter, and the end of the financial year for many.

And, for food commodity investors, it will bring US Department of Agriculture reports on American crop inventories as of March 1, and on farmers' intentions for spring sowings – data which the market has been anticipating for weeks.

This on top of the weekly US export sales data, which are themselves keenly watched statistics.

Corn regroups

The upshot was a weak-volume start. Less than 1,000 Chicago

wheat

lots had been traded as of 08:10 UK time (07:10 GMT).

And prices weren't too remarkable either.

Corn

for May was 0.2% higher at $6.64 ¾ a bushel, with May

soybeans

0.1% up at $13.73 ½ a bushel.

And, this time, there was none of the "sell corn, buy soybeans" spreading going on in new crop contracts in expectation of an acreage number showing that US farmers intend to plant significantly more of the grain (up 4m acres or so) than the oilseed (potentially a decline in area).

That is, after all, what crop economics imply.

In fact, the reverse was going on. New crop December corn added 0.3% to $5.97 ¼ a bushel, while November soybeans fell 0.1% to $13.62 a bushel.

Wheat, meanwhile, lost 0.2% to $7.25 ¾ a bushel for May, continuing its decline of the last session, as fall based on fund positioning ahead of the data.

Being short in the grain is, after all, fund's traditional stance, and which had been muted until late.

Chart pointers

But how will it go after the data?

Luke Mathews at Commonwealth Bank of Australia saw potential for soybeans, which are resting beneath key chart points such as the 50-day moving average at $13.86 a bushel or so for May.

"Soybean values are sitting just under resistance levels, positioned nicely ahead of tonight's USDA planting intentions report," he said.

"A low acreage estimate should be enough to push the market through these resistance levels."

'Sell the rumour...'

However, Jon Michalscheck at Benson Quinn Commodities cautioned that investors may have already have done much of the work, in terms of factoring in a report better for soybeans than corn.

The "negative tone in corn every since we flipped the calendar and entered the month of March is leading some to believe that the market is setting the trade up for a 'sell the rumour, buy the fact' type of report", he said.

So prices could move counter-intuitively after the event, just as they did last week when the USDA announced a huge US corn sale, believed almost certainly to China, but which prompted Chicago futures, which had already priced in the trade, to move lower.

'Will conditions improve?'

Mike Mawdsley at Market 1 took a different tack, saying "the market will react quickly to whatever the numbers are, and then its back to weather", and the prospects for US growers turning their spring sowings plans into reality.

"The latest outlook calls for wet conditions for Illinois, Indiana, Ohio, Missouri out into April 12. Iowa and Minnesota look to miss this precipitation, but temperatures for us will be on the cool/cold side," he said.

"Will conditions improve the last half of April?"

Corn seeding plans are particularly susceptible to a poor start to spring, the grain being earlier sown than soybeans.

Exports recover

Many foreign markets are awaiting the USDA data with interest too, meaning low volatility ahead of the event.

Kuala Lumpur

palm oil for

June, for instance, edged 0.2% higher to 3,318 ringgit a tonne, given some support at least by data on Malaysian exports of the vegetable oil.

Intertek Testing Services pegged shipments from the worlds second ranked palm exporter down 0.5% in March, a figure which might not appear good, but which is better than the rate of decline of 3.7% a week ago and 17% mid-month.

Rival cargo surveyor SGS estimated exports up 2.3%, a turnaround from a 14.7% fall mid-month.

Thai floods

Rubber

for September added 0.6% to 432.50 yen a kilogramme in Tokyo, after flooding delayed shipments of at least 50,000 tonnes from Thailand, the top producing country, and caused some production damage too.

"Some factories [are] halting or slowing output," Ker Chung Yang at Phillip Futures in Singapore said.

"The floods, caused by a week of unseasonal rains, may have already cut natural rubber output by 20,000 tonnes in March, around one-tenth of the country's forecast production for the month.

"The floods are expected to aggravate supply tightness amid the ongoing low-production rubber season."

By Agrimoney.com

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