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Morning markets: China data gives extra boost to crop prices

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With the influential monthly US crop report behind, crop investors moved on to weather - and China.

The bulls' campaign to regain control of farm commodities markets, after June's liquidation, received another boost on Wednesday when the Asian tiger unveiled second-quarter economic growth of 9.5%.

That beat market expectations and allowed risk markets in a general a collective "phew" that China, for now, was not adding to pressures being piled on, particularly, by the eurozone debt crisis.

Shanghai shares jumped 1.5% in late deals, while Tokyo stocks closed up 0.4%.

Elastic cotton

The wave of relief was even enough to revive

cotton

, which has suffered a poor few sessions and dragged New York's October lot to the lowest levels for a spot contract in nine months. The fibre, as a non-food commodity, tends to move more in line with world economy hopes than some food crops.

And China, the top producer and consumer and importer of cotton, is particularly significant. Signally, cotton futures on China's Zehngzhou exchange perked up too, adding 1.4% for January delivery.

New York's October contract edged 0.1% higher to 106.65 cents a pound as of 07:20 GMT (08:20 UK time), with the better-traded new crop December contract up 1.3% at 105.75 cents a pound.

China's data was also key to a revival in another non-edible crop –

rubber

- which jumped 3.6% to 376.10 yen a kilogramme in Tokyo for December delivery, after four sessions of decline fostered by eurozone economic problems, as well as data showing Malaysian production up 11% in May to more than 71,000 tonnes.

'Weather trumps all other news'

In Chicago, grains continued to attract gains, helped by Tuesday's well-received US data, which pegged domestic

corn

and

wheat

inventories below market estimates.

But, increasingly, weather concerns are taking the limelight. "Now that this data news is behind us, it's all weather from here," Mike Mawdsley at Market 1 said.

"Weather trumps all other news," at a time when a ridge of hot weather is due to last for the next two weeks. "Will it linger into August too?"

Yield threat

Jon Michalscheck issued a reminder of what might happen if it does.

"A year ago on the July [US Department of Agriculture Wasde crop] report the estimated yield was pegged at 163.5 bushels per acre prior to a hot and dry July and August trimming it down to 152.8 by the time harvest was complete.

"If a similar situation would happen to develop this year the yield would decline to 148.2 bushels per acre.

"I'm not saying that we should necessarily be bullish, but only pointing out that this year's corn crop is not in the bin as of yet."

On a lesser scale, Lynette Tan at Phillip Futures noted the damage caused on Monday in Midwest by winds which hit 130 miles per hour in Iowa, destroying potentially 275,000 acres of corn.

"The storms flattened corn fields at the key pollination phase of corn crop development," she said.

Black Sea victory, again

Corn for September, which soared 3% in the last session as funds bought back 20,000 contracts in the grain, added a further 0.9% to 6.70 a bushel. The best-traded new crop December contact gained 0.7% to $6.62 ½ a bushel.

And that helped fellow grain wheat too, which gained 0.5% to $6.75 a bushel for September,

There was a little more, mixed, news about wheat out overnight, with China upgrading its estimate for wheat output by 1.3m tonnes to 116.8m tonnes. (That said, as China, while having a huge crop, does not change much, its data changes tend to attract relatively muted interest.)

Separately, the Philippines were reported as the latest buyers to emerge, purchasing 75,000 tonnes of feed wheat – from the Black Sea, at an estimated $265 a tonne, cheaper than Australian, North American or European grain can be got for.

This following Russian victories in Egyptian and Jordanian tenders last week.

'Long way to go'

Soybeans

maintained their sequence of gentle moves, this time adding 0.4% to $13.61 ½ a bushel for August, and the same to $13.64 ½ a bushel for the better-traded new crop November contract.

The oilseed was less favoured by the USDA's Wasde report. But too runs the gauntlet of heat in the US, the top producer.

"The trade is keeping an eye on hot, dry weather, with a long way to go for this year's crop," Ker Chung Yang at Phillip Futures said.

Elsewhere in the vegetable oil complex,

palm oil

did better, adding 1.2% to 3,071 ringgit a tonne in Kuala Lumpur, spurred by the firm economic data from China, a major buyer.

By Agrimoney.com

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