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Morning markets: China harvest forecast saps crops

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Crops, once more, started the weekend in weak form, sapped by external markets as well as a promising statement on China's autumn crops, and waning frost fears in America.

The dollar recovered some ground, notably against sterling, which was weakened by a Bank of England statement that the credit crunch may have damaged the currency's sustainable exchange rate.

A stronger dollar makes assets denominated in the currency, including Chicago crops, less appealing to foreign buyers.

Besides the dollar, oil was put under pressure by a statement from Chinese refiner Sinopec of relatively weak diesel demand in the country.

New York life crude for October stood $0.59 lower at $71.45 at 06:15 GMT. Weaker oil is unhelpful to crops, such as corn, used in making biofuels.

China harvest

Among crop fundamentals, the weather forecast appeared to predicate against a rerun of the buying on frost fears which sent prices soaring last Tuesday.

US temperatures will remain "mostly above normal" this week, Meteorlogix said.

To cap it all, China's agriculture minister, Sun Zhengcai, said that the country was expecting a big harvest of autumn grains despite the frost and drought damage reported in some areas, which have led some analysts to revise down forecasts steeply for corn and soybean production.

"The severe drought since August in parts of the northeast and south have affected grains production, but for the whole country, if there is no major weather disaster, we still expect the autumn grain harvest to be good," he said.

Rains needed in Australia

Chicago corn for December lost 2.5 cents to $3.15 ½ a bushel, while November soybeans were 4.25 cents lower at $9.36 ¾ a bushel.

December wheat lost 3.75 cents to $4.53 ¾ a bushel. While New South Wales' wheat crop looks to be a poor one, with the Australian state's farm minister Ian Macdonald saying that output may drop by 1m tonnes because of dry weather, hopes for the national crop remain high.

Kuala Lumpur's Bursa Malaysia Derivatives Exchange was closed on Monday for a public holiday.

By Agrimoney.com

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