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Evening markets: funds spark widespread rally

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The flood of incoming fund money began to make it look difficult to lose on farm commodities - at least if staying long - sparking a widespread rally on Thursday.

US and European shares were losing ground late into the day. But, with the dollar weakening against the yen and crude prices rising, that was about the only caution signal to investors seeing commodities as a way of broadening portfolios, protecting against inflation risks or merely exploiting the "food shortage" play.

"It is an investment flow rally," Shawn McCambridge, analyst with Prudential Bache Commodities, told Reuters, the news agency.

"They seem more willing to take on more risk - looking for volatility and greater profit opportunities."

Sweet beans

Cocoa was notable on the winners' board, adding 3.1% to $2,587 a tonne in New York, with London cocoa soaring 4.1% to £1,705 a tonne.

That appeared to have little to do with the short-term news flow. Indeed, markets appear to have ignored a International Cocoa Organization report on Wednesday revising its forecast for the world's 2008-09 cocoa deficit to 84,000 tonnes from a previous estimate of a 193,000 tonne shortfall.

Other softs on the rise included orange juice, which added 0.35 cents to 94.50 cents a pound, failing narrowly – once again - to break through its recent intraday high of 95.50 cents a pound.

Coffee had better luck, adding 1.25 cents for New York's July contract to close at an eight-month high of $1.3675.

'Verry bullish for wheat'

Even hogs put in their first positive day of the week amid speculation of tighter pig numbers, adding 0.075 cents to 65.35 cents a pound for Chicago's June contract, and 0.375 cents to 67.00 cents a pound for July at 17:30 GMT.

But among Chicago's big crops, wheat took the laurels, adding 9.75 cents to $6.35 ½ a bushel for July and topping $6.46 a bushel earlier, its highest since early January. New crop contracts showed similar gains.

Technical factors played a role in attracting investors.

"The daily bar charts still look very bullish for wheat," Vic Lespinasse at GrainAnalyst.com, said,

Crop losses

Still, fundamentals also had a part, with fears growing for the impact on wheat supplies of slow plantings of the US spring wheat crop and damage to the winter crop.

"The underlying threat to production from loss of acreage is real," Tim Emslie, analyst for Country Hedging in Minneapolis, said.

"The market is roughly pencilling in 0.5m-0.75m acres of spring wheat in the US as lost."

Soft soy

Such observations were not lost on European traders, who marked London wheat £1.50 higher to £122.50 a tonne for July, the contract's highest for nearly three months, with new crop contracts making similar headway.

In Paris, November wheat was the top performer, adding E2.75 to a three-month high of E161.75 a tonne.

Soybeans, Chicago investors' usual tipple of late, was little supped, adding 1 cent to $11.88 a bushel for July, and failing to make it back over the $12 a bushel mark. New crop contracts were a mixed bunch.

Indeed, even corn put in a stronger performance, adding 2.75 cents to $4.28 ¾ a bushel for July delivery, a rise in line with new crop contracts.

By Mike Verdin

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