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Evening markets: bitter US data sour crop prices

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Crops ended a poor week on miserable form as some moderate US economic data reminded investors that the war against recession was not yet won, sending investors back to safe havens.

The trigger for the flight to safety was official data showing US consumer spending down 0.5%, or $47.2bn, last month, while the influential University of Michigan survey showed housing confidence dropping this month on unemployment fears.

The reversal in sentiment, following Thursday's strong US economic data, was reflected across financial markets.

Flight to safety

The dollar, the primary citadel in times of economic uncertainty, gained. The greenback, around $1.50 against the euro a week ago, stood at $1.4714 at 19:00 GMT, and posted its best weekly gain since June against a basket of currencies.

A strong dollar is a setback for all dollar-denominated exports, making them more expensive to buyers.

Equities fell. London shares lost 1.8%, Paris stocks 2.9% and Frankfurt equities 3.1%, while the main US indices were down 2%+.

And oil tanked 3.6%. Crude is an important indicator for crops, many of which, such as corn and wheat, are used to make biofuels.

Economy vs fundamentals

Against that backdrop, there was little hope for crops. As French analysis group Agritel put it: "Commodities markets are more and more dependent on economic and financial indicators than on agricultural fundamentals."

What's worse, as the last day of the trading month, it was set to be a day when "funds supposedly are more active than usual", according to Vic Lespinasse, the GrainAnalyst.com analyst.

"If so, this could push prices further in either direction."

They fell pretty much across the board, with even orange juice, which has gained some support from forecasts of a falling Florida crop, caught up as funds once more pressed the sell button.

'Quality concern'

Among the big guns, corn was the worst hit, slumping 3.6% to $3.66 a bushel in Chicago for December delivery. The close was the lowest for two weeks, and took the grain's fall for the week to 8.0%.

For what it's worth, the forecasts are for pretty dry weather to speed the US corn and soybean harvests next week, although that it not the end of farmers' fears.

US Commodities, the Iowa broker, said: "As the producers prepare for their first extended harvest opportunity, the question will be whether grain driers will be able to handle the increase.

"Crop quality will be a big concern this winter."

Still, that kind of talk wasn't enough to save soybeans either, with Chicago's November contract ending down 9 cents at $9.78 a bushel.

London standstill

Wheat, meanwhile, lost 9.5 cents to $4.93 ¼ a bushel. While better than corn on the day, it has performed worse over the week, shedding 10.0%.

Its European peers did a little better on Friday, protected in part by the stronger dollar.

However, a near-absence of trade at all helped London wheat for November close untraded, so effectively unchanged, on the day.

Hugh Schryver at Glencore noted that the London market as a whole failed to register any trades in the morning.

"This is not a common event and provides a fair representation of the UK wheat market over most of this week."

Farm sales from farm "simply ground to a halt" after selling into last week's highs, he said, while buyers remained on the sidelines.

Paris wheat for November ended E3.00 lower at E126.75 a tonne.

By Agrimoney.com

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