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Evening markets: stronger dollar weakens crops

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A strengthened dollar, on talk of an imminent US interest rate rise, sent crop commodities lower on Monday,

Soybeans held some of their ground on Monday, setting a fresh nine-month high while other crop commodities succumbed to a stronger dollar.

The dollar was helped by talk of an eventual interest rate rise, following signs of economic revival.

It rose against in particular against the euro, which was hurt by a second downgrade in Standard & Poor's ratings on Ireland's sovereign debt.

Oil felt some selling pressure, easing $0.26 to $68.18 a barrel for July delivery New York crude.

A stronger greenback makes dollar-denominated commodities more expensive to foreign buyers, so tending to act as a price suppressant.

'Small ending stocks'

However, soybeans - old crop, at least - were helped by talk that the US will, in updated forecasts for its soybean stocks, cut its estimate near to a 32-year low of 103m bushels, with some analysts predicting an even lower figure.

The market has been squeezed by strong Chinese demand at a time when drought-troubled Argentina, the third largest exporter, has had a miserable crop.

July beans added 6.5 cents to $12.32 a bushel at 17:30 GMT after touching a nine-month high of $12.39 ¾ a bushel earlier. New crop contracts were less fortunate, falling 1% from November onwards.

"Ideas are that we will see a very small ending stocks estimate out of the US Agriculture Department," Jack Scoville, vice president at Price Futures Group in Chicago, said.

"That seems to be really doing a number on the July-November bean spread."

Wheat slides again

Wheat felt the pressure throughout the date range, with the contract dropping 3.1% to $6.03 ¾ a bushel in Chicago - nearly 11% down from its highs of a week ago – and forward lots down 2.5% plus.

European wheats lost ground too, with London's November contract ending £3.85 lower at £126.40 a tonne and its Paris equivalent closing down E3.75 at E154.00 a tonne.

While many countries, such as Poland and the Ukraine, have dropped forecasts for this year's wheat crop, many traders believe that, with stocks still high, prices had got ahead of themselves.

Corn was also lower, down 7.75 cents at $4.36 ¼ for July delivery, in line with new crop contracts.

'Lessening tension'

Softs dropped too, even cocoa which has managed to move the opposite way to other commodities of late. New York's September contract lost $10 to $2,715 a tonne.

July sugar eased 0.21 cents to 15.32 cents a pound in New York. London's August white sugar contact ended $3.5 lower at $443.4 a tonne.

"Since the Brazilian harvest has come on line there's been a slight lessening in the tension in the market threatening to lead to explosive prices," Barclays Capital analyst Nicholas Snowdon said.

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