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Morning markets: China loan curb weighs on crops

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It would have been tricky, even in more bullish times, for Chicago crops to make much headway when external factors were set against them so.

In the current bear maul, they had little chance.

Corn headed lower for a seventh day, wheat set course for a close below $5 a bushel and soybeans hit a two-month low.

Shanghai surprise

It didn't help that the cocktail of negative external forces included pessimistic news from China, a huge buyer of US soybeans as well as such as significant feature on the global economic landscape.

Chinese banking authorities have instructed some major banks to stop new lending for the rest of January in a bid to curb loan growth and tackle fears of economic overheating. Buying of raw materials may feel some impact as a knock-on effect.

Shanghai shares slumped nearly 3% as of 07:50 GMT, while on the Dalian exchange, Chinese soybeans slid 1.2% and soyoil 1.8%.

Dollar lift

But that was only one negative external influence.

Crude oil eased 0.9% to 78.33 a barrel, a poor signal for crops such as corn which are turned into ethanol.

And the dollar strengthened, hitting a five-month top of $1.4166 against the euro. Much of this was down to euro weakness rather than dollar strength, as Greece's economic continues to concern the market.

However, the greenback made ground against other currencies too, so making its exports more expensive.

And this at a time when commercial buyers are coming aplenty to the market, at least for wheat, with Tunisia joining the buyers on Tuesday and Bangladesh viewed as likely to come soon with a huge 400,000-tonne tender.

'Fundamentals too negative'

Corn, the epicentre of last week's bearish US Department of Agriculture data, is being viewed as the ringleader if crops are going to mount any rally.

"All of the grains are probably looking at each other to stop the haemorrhaging and we would expect that based on current fundamentals it will have to be corn that makes the first attempt to stop the current slide," Jon Michalscheck at broker Benson Quinn Commodities said.

"Fundamentals by themselves appear to remain too negative by themselves to provide much in terms of support, unless the global outlook from Mother Nature changes the equation."

French-based analysis group Agritel said that "only a technical rebound" could help crops stage a recovery.

Remember December

And this may face strong selling pressure, with buyers such as Mike Mawdsley at Market 1 advising investors to "use any rally to $3.90-$4.00 [a bushel] in March futures to part with old crop corn".

The contract stood 1.25 cents lower at $3.68 a bushel.

March wheat was down 5.25 cents at $4.95 ¼ a bushel, while soybeans eased 3 cents to $9.60 ½ a bushel for delivery the same month.

One of the key battlegrounds on Wednesday could be over December corn, which stood down 1.5 cents at $402 ½ a bushel.

"Psychological buying could also be surfacing as the December contract inches closer to its $4.00 [a bushel] level," Mr Michalscheck said.

Dalian downer

In Kuala Lumpur, palm oil remained under pressure, weighed by the signals from Chicago and Dalian soyoil prices.

Soyoil is palm oil's major rival in vegetable oil markets, and traders have been relying on Chinese imports of palm to run down Malaysia's stronger-than-expected inventories.

The benchmark April contract dropped 45 ringgit to 2,445 ringgit per tonne on high volumes.


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