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Evening markets: crop rally runs out of steam

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Crops' rally showed signs of running out of steam on Wednesday as doubts grew about just how far buyers were willing to chase the market higher.

The dollar remained in US farm commodities' favour, slipping to a 14-month low against a basket of major currencies as good results from JP Morgan encouraged investors to let go of a currency viewed as a safe haven from economic storms.

The euro was worth a little over $1.49 at 17:00 GMT, around about its highest since August last year.

A weaker dollar makes US products, such as farm commodities, more competitive on export markets.

'Winter-like conditions'

There were snippets of bullish fundamental news too.

An Australia crop forecast went by without an upgrade. Grain handler CBH said Western Australian grain output in 2009-10 would struggle to improve on last year's.

The Buenos Aires Grain Exchange, again, trimmed estimates for Argentina's wheat crop.

And the Canadian Wheat Board reported that "winter-like conditions" across the Prairies, including snow and near-record cold temperatures, had halted harvesting with more than 10% of the wheat crop still standing.

"Two to three weeks of warm, dry conditions will be required for harvest completion," the wheat leviathan added.

Rain and frost

If anyone doubted reports of cold weather in the US too, the US Department of Agriculture put them right noting that rainfall ahead of last week's frost had "totalled 4 to 8 inches in flood-affected areas, halting fieldwork and threatening the quality of unharvested summer crops".

Temperatures had got as low as -10 degrees centigrade in Nevada, with plenty of other negative temperatures dotted around.

And this when a separate report showed that the US crop was still way behind in its development.

Indeed, there is speculation that the lateness of the harvest will leave farmers without time to plant winter wheat.

'Easy gains gone'

Still, there is a limit to how much the markets are prepared to swallow. And prices certainly paused for breath on Wednesday, falling well behind early highs as investors took the opportunity to book profits on the recent rally.

"Markets have done pretty well getting fund money in over recent days, but now the easy gains have gone, people may be a bit more wary about putting more in," a London trader told

Chicago wheat for December dipped 1 cent to $5.10 ¼ a bushel, well below a day high of $5.29 a bushel, while corn lost most of its early gains to stand up 1 cents at $3.82 ¾ a bushel.

Soybeans, once again, lost a foothold above $10 a bushel, retiring to $9.95 ¾ a bushel, up 2.75 cents on the day.

Weak monthly US crush data did not help, coming in at 107.4m bushels, some 5m bushels below market expectations.

'No hurry'

Europe's crops had already sounded the retreat, without the benefit of a weak currency to support them.

Paris wheat for November closed down E0.50 at E127.75 a tonne, with rapeseed slipping E1.50 to E266.25 a tonne.

"In buyers' eyes, there is more wheat available than can be used and good cover to Christmas, so they are in no hurry to chase the market up," Hugh Schryver at Glencore said.

London wheat ended down £1.20 at £103.50 a tonne.


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