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Midday markets: crops head for bumper May

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Food commodities did their best to finish May with a flourish, helped by fund inflows, and turn the month into one to remember – at least for investors with long positions.

Palm oil closed 2% higher at 2,552 ringgit [$730] a tonne in Kuala Lumpur, helped by crude oil, which is on course for its biggest monthly percentage gain in more than a decade, and bullish comments from an influential –and oft-bearish - analyst, James Fry.

Mr Fry, chairman of London-based LMC International, told a conference in Jakarta: "If you believe that energy prices will go on rising to $70 per barrel in six months' time, palm oil prices will reach $830 [a tonne] by year end."

While many observers believe production may ease market tightness, Friday's performance took palm oil's gains this month to nearly 28%.

'Still room for upside'

That looks likely even to beat wheat. Chicago's benchmark July contract stood 6.5 cents higher on the day at $6.37 a bushel in lunchtime trade, taking gains this month above 21%.

"There is still room for upside as there are too many things that can go wrong and are going wrong," Paul McKay, a director at Commodity Broking Services in Australia, told Reuters, the news agency.

Beside a poor US winter wheat crop, spring plantings in North America have been held back by wet weather. Meanwhile, dry weather is hurting grain crops in Eastern Europe, Spain and the UK.

"We are still in a weather market and boosted by a keen financial interest in commodities," a trader said.

Nonetheless, European wheats were held back by the rising euro, which kept Paris's August contract on hold at E151.75 a tonne.

Biofuel boost

Corn, meanwhile, stood up 4.25 cents at $4.33 a bushel for Chicago's July contract, taking its gains this month to 19.4%.

Corn has, as a major feedstock for biofuel, been helped by the rise in oil as well as problems in planting which many traders believe may see farmers switch to soybeans.

Indeed, soybeans were on track for the weakest monthly performance of the big-three despite garnering so much news coverage.

The July contract's 10 cent gain to $11.89 a bushel took its monthly improvement to a relatively modest 11.1%.

Still, traders were yet to factor in weekly US export sales data, which were expected at 300,000-450,000 tonnes for wheat, 700,000-950,000 tonnes for corn and 700,000-900,000 tonnes for soybeans.

Strong coffee

Among softs, New York's July arabica coffee managed only a 0.05 cent gain to 136.85 cents a pound in early trade. Still, that left coffee nearly 21% higher on the month.

And that's more than sugar which, for all the fuss about booming Indian imports, is up 12.4% in May for New York's July contract.

New York cocoa, meanwhile, was, at $2,630 a tonne, 12.2% up on the month, in turn beating its London equivalent which, thanks to the strengthening pound, is down 2.5% in May.

Investors may wish they had been in orange juice which, at 94.75 cents a pound, is 19.3% higher over the month.

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