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Evening markets: economy fears knock stuffing out of crops

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It was just like old times on financial markets.

Risk assets suffered a 2011-style spasm, which handed the S&P500 share index its worst day since December, after a cocktail of negative economic influences, chiefly China's disappointing growth outlook, unveiled on Monday, but also including Greek debt concerns and a weaker-than-expected Brazilian GDP number.

In Europe, London

shares

closed down 1.9%, Frankfurt stocks down 3.4% and Paris ones down 3.6%.

The safe haven of the

dollar

appreciated by 0.6% against a basket of currencies, hampering dollar-denominated assets further by making them less competitive as exports.

'Scant scale buying'

The scene was set for a drop in commodity prices, and indeed the CRB index finished 1.6% lower.

And many agricultural commodities were doing even worse.

Raw

sugar

, sapped by prospects of a not-too-bad Brazilian cane crop this year, and Czarnikow's uplift on Monday to its estimate for the world production surplus in 2011-12, dropped 2.6% to end at 24.05 cents a pound in New York, for May delivery.

"The gossip round the market is there seems scant scale buying underneath the market," Thomas Kujawa at Sucden Financial said.

"Overall, its hard to be bullish at the moment."

'Long liquidation selling pressures'

Furthermore, with funds having ratcheted up long positions, "this leaves the market technically overbought", Terry Roggensack at Hightower Report said.

"With bearish outside market forces and the lack of a strong fundamental story, the market looks vulnerable to short-term, long liquidation selling pressures."

If not as much as New York

coffee

, which closed down 4.2% at 193.05 cents a pound for May delivery, the weakest close for a nearest-but-one contract since October 2010.

Another downgrade

It needed a story to avoid heavy losses.

Cotton

had some support, following India's export ban, unveiled on Monday, which sent the fibre limit up iin New York.

However, there was some thought the ban could be repealed, with an official panel reviewed the curbs later this week. And some analysts pondered that the loss of Indian supplies may not make too much difference to market availability,

New York cotton for May ended 0.9% lower at 91.42 cents a pound in late deals.

And

soybeans

got a lift from yet another downgrade for the Brazilian crop, this time from Oil World, which cut its forecast by 1.5m tonnes to 68m tonnes, more like the kind of figure investors are tuning into.

"Crop reports from Brazil and Paraguay are alarming, with yields obtained smaller than expected," Oil World said.

...and another strike threat

Furthermore, as Paul Georgy at Allendale noted, while an Argentine dock workers' strike was settled last week "now truckers are expected to strike next week", putting a cloud over the country's exports.

That helped soybeans for May add 0.8% to $13.35 ¼ a bushel in closing deals, and provided some support for other Chicago crops too, helping limit their losses.

Corn

for May finished 1.0% lower at $6.54 a bushel , while

wheat

for May closed down 2.1% at $6.57 ¾ a bushel.

'A complete nightmare'

Traders also kept an eye on the latest monthly US Department of Agriculture Wasde crop report, due on Friday.

This will "hopefully give the market some much needed direction", UK grain traders at a major European commodities house said.

"But predicting which way it could point the market is a complete nightmare."

While weakening US corn consumption for making ethanol is raising ideas of a downgrade to the figure for domestic 2011-12 demand, disappointing South American crop prospects are pointing to production downgrades too

.

By Agrimoney.com

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