Market and product

There was a star farm commodity in early trading on Friday.

It was rubber, which hit 383.00 yen a kilogramme in Tokyo, a contract high for the May lot and, even more notably, matching a 30-year top for a benchmark contract.

And why not, when sales of passenger cars in China surged 29% to a record 1.34m last month. That's more than 6m tyres, including spare ones.

But even rubber couldn't hold on to its gains, amid fears that China will this weekend raise interest rates again, ahead of inflation data due for publication on Monday, an increase which would spell lower economic growth and therefore curb commodities demand in a huge consuming country.

Furthermore, the China Automobile Industry Association said it may finish next year tax incentives for purchasing passenger vehicles.

Tokyo rubber eased back to settle at 381.80 yen a kilogramme, up 1.5 yen on the day.

'Kneejerk moves lower'

And some of that Chinese caution was evident in Chicago too, where wheat, the market's leader of late, fell back.

"Prior changes to monetary policy in China have resulted in kneejerk moves lower in most if not all commodities," Brian Henry at Benson Quinn Commodities noted.

The prospect of a key US Department of Agriculture report later a further reason for investors to tread carefully.

The USDA will release its monthly Wasde report later which, while not expected to alter production estimates for American crops, in line with a December tradition, is thought likely to trim estimates for stocks at the end of 2010-11.

But by how much? Investors were not in early trade banking on a bullish surprise, sending Chicago's March contract down 0.4% to $7.85 a bushel as of 07:40 GMT.

Kansas wheat continued to outperform, helped by its higher protein credentials in a time when quality is a real issue, thanks to rainy harvest weather this year, most lately in Australia. Nonetheless, the March lot eased, by 0.2% to $8.42 ¼ a bushel.

Soybeans to 'soar'?

Where investors believe the USDA may come up with supportive data is in soybeans, with expectations of a downward revision in end-2010-11 stocks.

Consensus, according to Dow Jones, has the cut at 18m bushels, leaving inventories at 167m bushels.

However, Ker Chung Yang, at Phillip Futures, on Friday added his voice to those from the like of Societe Generale expecting a bigger cut.

"We believe that the ending stocks figure may come lower, by taking into account the good US export pace and strong demand for US soybeans," Mr Kerr said.

Such an outcome may see prices "soar and challenge the $13-a-bushel level", he added, a figure which certainly remained in reach in early deals, when Chicago's January lot was 0.3% higher at $12.85 ¾ a bushel.

Corn was less certain of direction, adding 0.25 cents to $5.74 ½ a bushel for March, with potential for a bullish Wasde revision, according to Societe Generale, but doubts over the extension of an ethanol tax credit, and better prospects for Brazil's crop, weighing on prices.

Exports tumble

In Kuala Lumpur, palm oil fell back after cargo surveyors showed Malaysia's exports of the vegetable oil falling back faster than expected so far this month, from a bumper November.

Societe Generale de Surveillance pegged the drop at 9%, and Intertek Testing Services at 24%.

Palm oil for February stood 0.2% higher at 3,606 ringgit a tonne, after touching 3,629 ringgit a tonne earlier.