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Evening markets: oil and rumours fuel crop revival

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A strong rally in oil coupled with a weaker dollar put a bit of backbone back into US crops, after higher-than-expected wheat stocks data undermined prices.

Oil stood 4.1% higher at $69.41 a bushel at 17:15 GMT, after official US data showed a 1.6m-barrel drop in domestic petrol inventories, rather than the rise analysts had forecast.

Given the use of many crops in biofuels, firmer oil is viewed as good for crop prices, which got a further boost from a weakening dollar, making US farm commodities more competitive on export markets.

A rumour also swept Chicago that funds were poised to mark the last day of the quarter with some large-scale speculative buying, although traders were cautious about giving the claim much credence.

Big harvest

The boosts helped wheat recover much ground lost after Washington revealed that this year's wheat harvest had beaten forecasts, thanks to record yields of durum and other spring wheat.

The rise meant US wheat stocks were higher than expected too, particularly on-farm inventories.

In Chicago, December wheat recover from a day low of $4.39 ¼ a bushel to $4.46 a bushel, down 1.5 cents on the day.

Kansas wheat for December also revived, standing down 2.5 cents at $4.66 a bushel, 6 cents above its day low.

In Europe, Paris wheat for November closed unchanged at E122.50 a tonne, while London feed wheat for the same month ended down £0.50 at £97.50 a tonne.

Indonesia fallout?

While Washington also revealed data on corn and soybeans, the figures were viewed by traders as of less importance for these crops, leaving them better able to react to other fundamentals.

For soybeans, this included some talk of Indonesia's earthquake disrupting supplies of palm oil from the world's biggest producing nation, potentially encouraging use of soy oils.

It was enough to encourage a spot of bargain hunting, anyway. November beans added 11.25 cents to $9.28 ¼ a bushel, rebounding from negative territory.

Corn was less volatile, standing up 0.75 cents at $3.41 ¾ a bushel for December delivery.

By Agrimoney.com

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