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Morning markets: Asian resilience helps crops to firm start

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Who cares about the Dow Jones Industrial Average?

OK, Asian shares hardly put in a bravura performance on Thursday, with Tokyo's Nikkei index closing down 0.6%. But that was better than the 4.6% slide by Wall Street's Dow index in the last session.

South Korea's Kospi index ended up 0.6%, while Shanghai shares were 1.3% higher in late deals.

New York


continued to benefit from surprisingly weak US inventory data, adding 1.8% to $84.41 a barrel as of 07:50 GMT (08:50 UK time), with an extra push from a weaker dollar, down 0.3% against a basket of currencies, so making dollar-denominated assets more affordable abroad.

And agricultural commodities reflected that more upbeat mood too, with better sentiment lessening fears for the demand side, although the prospect later of the US Department of Agriculture's August Wasde crop report – a particularly important issue of the monthly briefing – loomed large.

Firmer yuan


, a laggard of a late, was top of the pile this time - even outperforming the new star on the block, rough


which remained among its highest levels since 2008, adding 0.6% to $17.05 a hundredweight for September delivery, boosted by fears for the US crop.

Mood on soybeans was helped not just by the higher oil price, with


a major biodiesel source, but other evidence of demand, with Chinese demand on the up, as shown by Wednesday's China import data. (China's overall exports , meanwhile, hit a record high.)

And a lift in the peg of the yuan to the dollar to a record 6.3991 on Thursday, crossing the psychologically important 6.40-yuan-a-dollar mark was seen as a mark of Chinese confidence, even as the US stumbles.

Meanwhile, the Korea Feed Association bought 110,000 tonnes of soymeal from Glencore at an average of $416 a tonne.

Chicago soybeans for November added 1.2% to $13.17 a bushel, crossing back over the important 200-day moving average.

'Fundamentally bullish'

Sticking with oilseeds, the China factor helped

palm oil

make headway too, adding 1.3% to 2,974 ringgit a tonne in Kuala Lumpur, for October delivery, and exploiting better Malaysian export data for July, released, on Wednesday which were the best since at least 2006.

Sure, some of this might have been down to a one-off. "Reports on the ground indicate that some exporters switched sales from Indonesia to Malaysia in anticipation of a lowering of Indonesia's palm oil export tax," Abah Ofon at Standard Chartered said.

However, with data from cargo surveyors showing Malaysian export remain strong, "we remain fundamentally bullish on palm oil", Mr Ofton said, forecasting improvement in Chinese and Indian orders.

"In addition, the discount between crude palm oil and


has widened, making palm oil more attractive to Asian buyers. We forecast that crude palm oil prices will average 3,400 ringgit a tonne in the second half of 2011."

Back in Chicago, soyoil for September was 1.2% higher at 53.79 cents a pound.

Wheat downgrade?

And grains were higher too, notably


, which, as Luke Mathews at Commonwealth Bank of Australia noted, is getting support from "concerns that US spring wheat production will be revised lower" in today's Wasde.

At Benson Quinn Commodities, Brian Henry also clocked talk of a USDA downgrade to US spring wheat harvest forecast, if striking a less bullish note.

"I believe lower production will be partially, if not completely, offset by lower spring wheat usage," he said.

Minneapolis spring wheat for September delivery rose 0.7% to $8.42 ¾ a bushel, with Chicago soft red winter wheat, the speculator's favourite, adding 1.0% to $6.92 a bushel for the same month.

Corn edges higher

Of course, "the Wasde estimates as they pertain to


will likely have the most influence" on prices, Mr Henry noted, with traders eagerly awaiting the figure for the corn yield.

A drop of some 3 bushels an acre is expected from last month's 158.7 bushels per acre, with a figure even a little distance either way seen likely to provoke significant volatility in prices.

Still, even amid nerves ahead of the data, the higher oil price - a key factor for a grain of which some 40% of the US crop is used in making ethanol - and weaker dollar helped raise the December contract by 0.5% to $6.92 ¼ a bushel.


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