US soybean and corn futures edged higher on Friday, extending gains as short covering supported the market following declines to four-month lows earlier this week. The gains came despite a drop in Asian stock markets on jitters about the state of some Euro zone economies.
Both commodities also defied a safe-haven driven jump in the dollar index, which measures the strength of the dollar against six major currencies. The index broke through the 80 points mark on Friday for the first time since July, 2009. Corn and soybeans tested major lower support levels early on Thursday, sparking user buying.
"Last night we saw grains hold which was rather impressive as we did have those big sell-offs in other markets," said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia. But Mathews said a continued bearish influence coming through from outside markets would put a strong downward pressure across the whole commodities complex.
Asian stocks fell to near five-month lows on Friday as investors dumped riskier assets after rising sovereign debt problems in the euro zone and poor jobs data sent US and European stocks tumbling. Chicago Board of Trade corn for March delivery added 0.14 percent to $3.54-1/2 per bushel by 0450 GMT after briefly falling below the $3.50 level on Thursday before buyers moved in.
Holding support at $3.50 per bushel is seen as important to keep speculative funds in the game, one trader said. Soybeans for March delivery rose 0.22 percent to $9.16 per bushel. Corn has been benefiting from the Obama Administration's endorsement of the ethanol industry, prompting ideas of expanded demand for corn based on lagging cellulose production, FCStone analyst Doug Jackson said in a report.
He said traders were also clearly relieved over the US Environmental Protection Agency's decision prompting long-term prospects for the US biodiesel industry which would increase soybean oil based biodiesel production. Wheat eased 0.21 percent to $4.74-3/4 per bushel after gaining 1.4 percent on Thursday, helped by improved export demand at lower prices and short-covering by funds.
Investors are awaiting USDA monthly world agricultural supply and demand estimates to be released on Tuesday. "The grains market, the wheat market in particular, is still plagued by there still being ample stocks around," said Mathews.
"The price action we've seen over the last month has reflected that and now attention is starting to turn to the up-coming USDA report," said Mathews. The release of US January employment data later on Friday is seen providing direction to global financial markets. A Reuters survey predicted nonfarm payrolls grew 5,000 after a surprise 85,000 drop in December. The unemployment rate, however, is expected to edge up to 10.1 percent in January from 10 percent in December. The grain markets, including soybeans, have been weighed down in recent weeks by large supplies from North America and expectations of much bigger crops in South America.
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