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Evening markets: cocoa turns the table on grains

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Cocoa turned the tables on the big grains, managing � at last � to find support levels while Chicago's main crops slipped.

It was a forgettable day in many asset classes for investors with long positions. European and US shares eased, while oil had a shocker after downgrades this week from the International Energy Agency, the Energy Information Administration, and OPEC about global oil demand.

Brent crude for July was 4.0% lower at $56.26 a barrel at 17:00 GMT, with New York crude down 2.9% at $56.95 a barrel.

Weakness in Chicago grains was to be expected � and, indeed, to be found.

"The outside markets have become an increasingly bearish influence on the grains," Vic Lespinasse at said.

Corn, as a major source of ethanol, an alternative to oil-based fuels, felt the pinch, with the benchmark July contract easing 1.5% to $4.22 a bushel and longer-dated contract down similar amounts. March 2010, for instance, lost 1.5% to $4.53 � a bushel .

Glass half empty

Wheat suffered similar across-the-board losses, as the bearish atmosphere focused traders' minds on the bad news � forecasts of bumper stocks ahead �rather than the potential bullish news waiting in the wings.

For example, the potential for a further slowdown in US spring crop plants and dry weather in Western Australia and Argentina.

July 2009 wheat lost 1.6% to $5.83 � a bushel while, for instance, July 2010 was 1.5% lower at $6.60 � a bushel.

European wheats got some protection from weaker currencies. London July wheat, for instance, slipped a relatively mild �1.00 to �120.00 a tonne, with Paris August wheat down E1.50 at E148.00.

Reduced hopes for crops in the European Union's backyard rival, Ukraine, have also protected European wheat somewhat. UkrAgrConsult, the analysis group, cut its estimate of Ukraine's overall grain production from 40.0m tonnes to 38.7m tonnes.

'Strong support'

So soybeans proved the best of a bad Chicago bunch, slipping 1.2% to $11.34 a bushel for July, with similar losses in further ahead contracts as traders tempered betting against a crop which still appears to be in strong demand in China.

And cocoa trumped the lot of them by closing up 1.1% at �1,607 a tonne in London, for the July contract, and standing 0.9% up at $2,330 a tonne in New York.

Cocoa has suffered four days of losses on reports of weak demand and decent supply, which have sent prices through a series of levels which traders had hoped might offer support.

The level of $2,300, however, appears to have held.

"It does look as if prices are struggling to fall through the $2,300 level," Nicholas Snowdon, an analyst at Barclays Capital told Reuters, the news agency.

"There might be dips beneath, but there definitely seems to be strong support around there."


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