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Morning markets: Chicago crops await inspiration

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Chicago crops struggled for direction in early deals, leaving Kuala Lumpur palm oil to take the honours with a modest rise on talk of Chinese demand.

March palm oil added nearly 1% at one stage before retiring to stand up 16 ringgit at 2,696 ringgit a tonne at 08:00 GMT.

Traders credited a range of factors, including stronger prices for crude oil, which continued to rise on Tuesday, nearing $82 a barrel, and the weaker dollar, which makes palm products sold in the currency more competitive.

Higher prices of soyoil, palm oil's keenest rival, on the Dalian exchange in China, the biggest importer of vegetable oils, was also cited.

Indeed, Chinese demand is expected to remain buoyant in the run up to its new (lunar) year celebrations next month.

'Aggressive, follow-through buying'

Chicago crops, meanwhile, barely budged despite the further erosion of the dollar, which hit $1.4483 against the euro at one point. At that level, the euro had recovered more than 2 cents from Monday's low.

Talk is still of prospective buying by funds fresh with New Year money, as well as facing a rebalancing process which will favour 2009's laggards, such as grains, over top performers such as copper.

Some traders said they had already noted elements of fund buying, with some 7,000-8,000 corn contracts snapped up in the last session.

"Aggressive, follow-through buying by the funds, traditional as well as index, appeared to have confirmed what the majority of the trade had been expecting for the past month - and that was renewed buying interest by the speculative crowd once we entered the New Year," Jon Michalscheck at broker Benson Quinn Commodities said.

Meanwhile, weekly regulatory trade data, released late on Monday, showed traditional funds as "aggressive" buyers, snapping up 14,136 long futures and options contracts over the last week of 2009 and increasing their net long position.

Grower sales

Corn's soft spot, however, is the pressure from farm selling, which looks especially attractive now the price is at its highest for six months. The March lot stood unchanged at $4.18 ½ a bushel.

Wheat for March eased 0.75 cents to $5.57 a bushel, at least holding on to most of its strong gains of the last session, and under less pressure from grower selling.

Soybeans for January added 1.25 cents to $10.50 ¾ a bushel, with the better-traded March lot adding 0.25 cents to $10.58 ¼ a bushel.

Regulatory data showed that investors, and particularly commercial traders, undertook a widespread closure of positions, both long and short, ahead of a pressure expected to come from South America's harvest.


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