25/03/2011 (Agrimoney.com) - It's a big day. Well, it could be. OK, latest thinking is that there is only an outside chance.

But Thursday will bring the US Department of Agriculture's weekly export sales report which, just possibly, might confirm whether those rumours are true that China bought US corn during the break in prices last week.

Traders have few hopes of overall corn export sales reaching the 1.34m tonnes they did the week before, with guesses scattered between 750,000 and 1.0m tonnes.

"US corn export sales are likely to slip from a three-week peak as demand from earthquake-shattered eased," Ker Chung Yang at Phillip Futures in Singapore said.

But if Chinese purchases appear in the report, expect some market reaction, with the size of any deals also important, of course.

'Beijing did buy some corn'

Not that a failure of China to appear would necessarily mean that market rumour of the deals was wrong, with "unknown" for instance a popular category in the reports, or with trade potentially being booked as, for instance, with Japan, and then transhipped.

Commodities guru Dennis Gartman is one who believes that a deal was done, whatever.

"It now does appear that… Beijing did buy some corn," Mr Gartman said, adding that China had "gamed the system" by releasing rumours that they would remain out of the market, supporting such talk by releasing small amounts of grain from state reserves for domestic users.

Still, in early deals on Thursday, investors continued to withdraw a bit of China premium from the grain, as Chicago continued the gentle downward direction of the last session.

Direction lacking?

Indeed, the market's default position is to do not a lot, with a week to go before one of the key farm commodities reports of the year – USDA estimates of America's spring sowings campaign – besides data on grain stocks too.

"We do not expect the grain markets to trade with any strong direction, barring any major external market shocks, ahead of the USDA reports next week," Australia & New Zealand Bank said.

"Until we get new direction from the USDA, markets should continue to consolidate."

Rain on the Plains

Two factors which are instilling a little bit of direction are the dollar - which strengthened again, adding 0.3% against a basket of currencies, so adding a depressant to prices of dollar-denominated commodities - and the weather.

Dryness in the US southern Plains is set to relieve parched hard red winter wheat seedlings, with two systems expected to pass through in coming days, the second of which, on Sunday and Monday, is expected to be the most generous in precipitation terms.

"Forecasters predict Kansas, the country's top wheat-growing state, will receive up to an inch of badly needed moisture from rain and snow in the coming days," Mr Ker said.

At Benson Quinn Commodities, Dave Lehl said. "The current weather forecast is no drought buster for the southern Plains. But precipitation would be very timely and could remove some weather premium from the flat price as well as inter-market spreads."

Again, wheat in Kansas, where the hard red winter variety is traded, underperformed, shedding 0.5% to $8.26 ¼ a bushel for May as of 08:10 GMT, against a 0.3% drop to $7.12 a bushel for Chicago's equivalent.

Minneapolis (spring) wheat eased a mere 0.25 cents to $8.58 ¾ a bushel, with rains increasing the chance of disruption to spring sowings.

In fact, dryness concerns are spreading to the European Union, where consultancy Agritel noted that "market operators still hope rains will arrive soon on regions located North from the Loire river, but no rainfalls are forecast for the next 10 days".

Jaime Nolan at FCStone's Dublin office said that dryness was "building across continental Europe".

Fibre falls

Corn, meanwhile, lost 0.5% to $6.77 ¾ a bushel for May, with the new crop December lot moving in line, down 0.5% at $6.06 ¾ a bushel.

Soyabeans, their closest rival in the battle for US spring sowing acres, saw a slight profile in the futures curve, with the May lot shedding 0.2% to $13.48 a bushel but the new crop November shedding only 1 cent to $13.32 ¼ a bushel.

Cotton, another competitor, shed 1.4% to 199.00 cents for May in New York, feeling, as a non-food agricultural commodity, more of the world economic uncertainties, besides being involved in the race for acres too.

Luke Mathews at Commonwealth Bank of Australia noted that "concerns over global growth prospects, related to further weakness in US housing data, European debt concerns, Japan and Middle East and North Africa violence", were weighing particularly on the fibre.

Squeeze eases

Even so, cotton could at least claim to be faring better than palm oil, which lost 4% at one point in Kuala Lumpur, falling to a four-month low, on expectations of improved supplies.

Besides the weak Malaysian export data coming in from cargo surveyors, market talk is of healthy growth in production – boosted both by improved weather as well as a forthcoming seasonal upswing.

The benchmark June contract recovered some ground to stand 1.9% lower at 3,243 ringgit a tonne.