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Evening markets: crops crushed by flight to safety

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Monday went from bad to worse for agricultural commodities after a lowered World Bank forecast for the global economy sent investors fleeing back to so-called safe haven investments.

The World Bank said it expected the global economy to shrink by 2.9% this year, compared with a previous forecast of 1.7%.

Investors responded by selling equities, with French and German shares slumping 3%, and buying the dollar, which strengthened near to $1.38 against the euro - weakening the case for dollar-denominated commodities by making them more expensive to foreign buyers.

Indeed, oil - a leading indicator for commodities because of their use in making biofuels - slumped 4.2% to $66.63 a barrel for New York's July contract.

High pressure

Headline losers among food commodities included London cocoa for September which, even with some protection from weaker sterling, closed down 1.1% at a six-month low of £1,584 a tonne.

Chicago crops had the extra factor of benign US farming conditions to deal with.

"Weather continues to weigh on the market as good harvest weather pressures wheat, while good growing conditions weigh heavily on corn and beans," Vic Lespinasse at said.

Corn was the worst affected among the big crops, however, standing 3.1% lower at $3.87 a bushel at 17:45 GMT, its lowest level since late April.

Many investors had been banking on a spell of poor weather, coupled with prospects of thin stocks, to send corn prices spiking.

Soybeans slide

Soybeans were the next worst off, losing 2.0% to $11.55 ¾ a bushel for the July contract, despite forecast of wafer-thin US stocks, with new crop contracts showing slightly smaller declines.

Wheat's 1.3% drop to $5.48 a bushel looked, in comparison, respectable, although it has already been a "loss leader" for Chicago – slumping 19% since the start of the month.

It even outperformed London wheat, which lost $4.00 to £101.50 a tonne for July, and Paris's nearest contract, August, which dropped E3.00 to E136.75 a tonne.

Hogs wallow

Elsewhere, orange juice, always a sucker for a negative signal at the moment, dropped 1.2% to 76.40 a pound, a fresh three-month low.

And, on livestock markets, lean hogs for July renewed their downward path, shedding 1.8% to 60.35 cents a pound in Chicago.

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