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Morning markets: Bernanke Bounce beats Turnaround Tuesday

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Turnaround Tuesday tussled with the Bernanke Bounce in early deals, and the latter gained the upper hand.

By Chicago lore, the second day of the week reverses strong trends of the first, implying sell-downs for Monday's gainers, notably soybeans.

But financial markets remained cheered by comments from the US Federal Reserve chairman Ben Bernanke on Monday, that US economic "conditions remain far from normal, as shown, for example, by the high level of long-term unemployment", an assessment seen opening the door for easy monetary policy.

Shares

gained more than 1% in Seoul and Singapore, and 2.4% in Tokyo, and opened firm in Europe.

And that kept some buying pressure in commodities too, whose prospects are often seen boosted by ideas of inflationary pressure, as potentially encouraged by an easy monetary policy stance.

Six-month high

Much again focused on the oilseeds complex, where

palm oil

rose to a fresh one-year high of 3,497 ringgit a tonne in Kuala Lumpur, before easing to 3,487 ringgit a tonne, up 0.6% on the day, as of 09:10 GMT.

The vegetable oil is being boosted in part by the continued concerns over supplies of rival

soyoil

from South America, the biggest exporters, following drought damage to

soybean

crops.

(That said, soyoil itself edged only 0.1% higher to 55.47 cents a pound in Chicago for May delivery.)

But palm oil is also gaining an extra boost of strong demand in the months running up to Ramadan, the Muslim festival period, which starts in July.

'Ration demand'

"Demand for palm oil will be greatest just when production will not have had time to recover" from its typical lull around now, influential analyst Dorab Mistry said.

Indeed, "reports of March production are also not encouraging", he said, restating a forecast that palm oil output in the first half of 2012 will decline year on year.

"We are likely to see very tight stocks and a run up in prices so as to ration demand," Mr Mistry told a conference in Beijing which, on Monday, witnessed an estimate from Oil World's Thomas Mielke of soybean prices hitting $14-15 a bushel.

'Narrow door'

Chicago soybeans for May, which closed the last session at a six-month high, rose a further 0.3% to $13.84 ¼ a bushel, continuing to gain their own support from the South American crop woes, which have certainly gained the attention of non-trade investors.

Funds are continuing to extend a long position which has already hit a record high – raising fears over how much buying pressure is left unfulfilled.

"Trend-following funds are building a large long position in soybeans, and are longer now than when soybeans made their highs last summer," Mike Mawdsley at broker Market 1 said.

"It doesn't mean we can't go higher, but if/when they decide to sell, it could be a narrow door to get through."

Worries were eased by a further rise in soybean prices on the Dalian exchange in China, the top importing country, where the May contract closed up 0.2% at 4,424 yuan a tonne, the highest for a spot contract since autumn 2008, and the better-traded September lot added 0.2% to 4,562 yuan a tonne.

Chart line

The Dalian was not so supportive to

corn

, with the price of the September lot falling 0.3% to 2,444 yuan a tonne.

Still, Chicago's May corn, having been in the doghouse in the last session, did manage a bounce, largely on technical reasons, after the lot's fall was blocked in the last session by the 100-day moving average, at a little over $6.37 a bushel.

The contract on Tuesday added 0.7% to $6.42 a bushel.

On a new-crop basis it, for once, beat soybeans too, adding 0.4% to $5.53 ¼ a bushel for December, in line with the 0.3% gain to $13.33 ½ a bushel for November soybeans.

'Severe rain shortage'

For wheat, influence is continuing to come from Europe, where crops in western areas are suffering undue dryness.

As a European Commission report on Monday put it: "A severe rain shortage has been observed since December in Spain, Portugal and Morocco, the driest period in our climatological record for southern Spain.

"Below-average winter precipitation is recorded also in southern France, northern Italy and some areas of England, Austria, Slovenia and Hungary as well as in southern and eastern parts of European Russia."

"There are visible signs of water scarcity in southern France, central and northern part of Italy as well as some areas of England, Austria, Slovenia and Hungary."

'Wheat crop improved'

Such thoughts offset some of the impact of a US Department of Agriculture report out overnight showing hard red winter wheat improving in Kansas, the top growing state.

"With the precipitation and warm weather, the condition of the wheat crop improved," the USDA said, estimating the crop 59% in "good" or "excellent" health, up from 54% the week before.

Still, hard red winter wheat, as traded in Kansas, fell 0.2% to $6.97 ¾ a bushel for May delivery.

By Agrimoney.com

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