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Evening markets: corn-oil decoupling accelerates

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Decoupling isn't only for equities. Farm commodities on Monday staked their own claim to the term, which has been typically applied to developing country shares' apparent disconnect from the performance of Western stocks.

Market wisdom has it that oil and farm commodities, and in particular corn, are linked by their use in fuels. Corn is a major feedstock for ethanol plants, besides a feedstuff for animals.

However, while oil was at 17:15 GMT soaring 3.5% to $71.57 a barrel, for benchmark New York crude, Chicago corn for July was dropping 2.75 cents to $3.81 ¾ a bushel.

Earlier, the contract fell to $3.75 ¾ a bushel, its lowest since late April.

Strong divergence

Oil has now risen 8% this month, with the latest surge prompted by renewed attacks by Nigerian rebels on oil facilities, this time on a Shell plant in the Niger Delta.

Corn, meanwhile, is down 13%. Traders said that Monday's weakness represented in part good growing conditions in the US Midwest, which has disappointed investors banking on weather upsets to boost prices.

Weekly US export inspections data were also lower than expected.

However, trade remained light ahead of Tuesday's key report on crop plantings. Traders are expecting the report to show a switch by farmers from corn, whose planting was delayed by rain, to soybeans, which can be sown later and still give a decent yield.

Nonetheless, there is a difference of opinion, with Alaron Trading, for instance, forecasting that the report will show lower corn and soybean plantings that the US first thought.

Tale of two beans

Soybeans, meanwhile, added 1.9% to $12.24 a bushel for July delivery, helped by robust export inspection data of 27.7m bushels.

Once again, the near-term contract outperformed, helped by the prospect of a stocks squeeze. November beans were 4 cents lower at $9.87 a bushel.

Wheat joined corn on the losers' board - despite its growing use in making bioethanol - slipping 5.25 cents to $5.29 a bushel taking its losses this month to about 17%.

Weather again took some of the blame, with conditions good for the US winter wheat harvest, with weekly export inspections also weak at 10.1m bushels.

Parched France

For once, European contracts did better, helped by concerns of too much sun for the French milling wheat crop.

Paris wheat for August added E3.25 to E138.50 a tonne, with London's July contract up £1.75 at £98.75 a tonne.

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