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Evening markets: firm dollar, weak MFG, poor fare for crops

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By repute, month ends are weak times for agricultural commodity prices, as funds undertake a buit of washing up and square positions.

October 31 was no exception, with a return to a most definite "risk on" atmosphere offering little chance for bulls.

If Japan's intervention to weaken the yen got matters off to a bad start, by sending the

dollar

soaring and so making dollar-denominated assets less affordable to buyers in other currencies, latest news from the eurozone revealed - surprise, surprise - that all was not still well within the region.

Yields on Italian bonds hit 6.11%, a record since the country joined the euro, while George Papandreou, the Greek prime minister, out a cat amongst the pigeons by calling for a referendum on whether to embrace the eurozone debt plans – creating the option of a "no".

London

shares

fell 2.8% while Frankfurt stocks dropped 3.2%, with Wall Street stocks down some 1.5% in late deals.

MFG story reaches chapter 11

Furthermore, commodity markets had the fallout from MF Global's filing for bankruptcy to deal with, and talk of continued sell-downs of positions. (Indeed, MF Global commodities customers were allowed liquidation only on commodities traded on Ice and CME Group exchanges.)

"The MF Global situation is probably hurting the oil sector more than most of the sectors," Darrell Holaday at Country Futures said, although Brent crude actually recovered a lot of ground to stand a modest 0.5% lower at 109.35 cents a pound late on.

"Of course, that is pressuring the grains sector," with the likes of

corn

big sources of biofuels, whose prices are linked to that of oil.

MF Global is reputed to have large positions in corn, especially, too.

'

Painfully dry'

Whatever, that more than outweighed the impact of some bullish snippets which did appear for grains, with weekly US exports for soybeans, at 48.5m bushels, and wheat, 20.8m bushels, rising, and corn's reasonable respectable, at 27.7m bushels.

Weather forecasts are looking more unhelpful, with rain hampering the Western Australia harvest, but not appearing where it is wanted, such as the US southern Plains, where autumn grain sowings look set to stay dry, and Ukraine, ditto.

Ukraine will be "painfully dry with rainfall amounts 25% of normal or less" over the next seven days, as it will be for western Russia, according to WxRIsk.com.

The lack of rains was becoming "more critical" for winter grains, Agritel's Kiev office said.

'Now threatening'

And, importantly, a shortfall of rain in parts of Argentina is beginning to raise eyebrows too, when the country has appeared set for jumps in production of both corn and soybeans.

"Weather in South America for now is now threatening," US Commodities said.

"It is a La Nina year and the trade will be concerned that Argentina will turn dry at some point if the La Nina does not die."

Delivery surprises

There was some downbeat news too, notably larger-than-expected deliveries on November rice and soybean contracts, of 861 lots and 741 lots respectively, seen as an indication that futures are offering a relatively generous exit compared with cash markets.

Still, that was hardly all the story.

Rough rice

, which fell 0.6% to $16.64 a hundredweight for November, and soybeans, down 0.8% at $12.07 ½ a bushel, were actually among Chicago's better performers.

Corn for December dropped 1.2% to $6.47 a bushel, while

wheat

for the same month dropped 2.5% to $6.28 ¼ a bushel.

Paris wheat at least managed a slim close higher, by 0.1% to E187.00 a tonne for November delivery, helped by a weaker euro, which lost more than 1.5%, making euro-denominated assets more competitive on export markets.

London wheat for November dropped 1.3% to £151.00 a tonne, suffering something of a reversal from a strong gain on Friday which had owed something to weak commercial selling interest.

"By Friday, 193 tenders, 19,300 tonnes, were received by [the London futures exchange], compared to 981 tenders, 98,100t, at the same point on the November 2010 contract," the UK's Home Grown Cereals Authority said.

''Normal' correction'

Soft commodities were hardly strong performers either, with New York

cotton's

winning streak of last week running into a wall, with the December lot closing down 2.0% at 102.29 cents a pound.

"A strong dollar and weak outside markets, including overnight prices in China, are pressuring cotton," veteran trader Mike Stevens said from Louisiana.

Technically, he noted that the December contract "stalled on Friday at upper end of 98/100 cents-to 104/105 cents trading range, and right at the upper Bollinger band, setting up a 'normal' correction or consolidation".

However, New York

coffee

did worse, tumbling 3.5% to 226.95 cents a pound for December delivery, amid fears that demand for the bean might be particularly badly hit should eurozone concerns further dent world economic confidence.

By Agrimoney.com

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