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Morning markets: China revival fuels bean recovery

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Food commodities remained under pressure on Tuesday, despite a better performance by Shanghai stocks, as official data showed US crops remained in fine fettle, with little prospect of any weather upsets.

A report that a Chinese regulator has said that state-owned enterprises will be allowed to walk away from loss-making commodity derivatives trades is also concerning investors.

Caijing magazine reported that the Assets Supervision and Administration Commission told six foreign banks that state-backed investors reserved the right to default on contracts.

That said, traders pointed out that defaults from China, a particularly big buyer of soybeans, have not been a problem yet and that the country may be reluctant to jeopardise its position as an emerging power by going back on its word.

Index recovery

Indeed, soybeans were the best performing of the big-traded crops on Tuesday, recovering some ground lost the previous session. Chicago's September contract stood 6.75 cents higher at $11.06 ¾ a bushel at 06:15 GMT, with new crop November beans up 3 cents at 49.82 ¾ a bushel.

China's shares also helped, rebounding 0.9%, as an HSBC purchasing managers' index showed the best reading for 16 months. New York crude recovered back over $70 a barrel, just, adding 0.4%, and Tokyo stocks closed 0.4% higher.

That said, soybeans' vegetable oil rival, palm oil, had a bit of catching up to do. Bursa Malaysia's Derivatives Exchange was closed on Monday, when Chicago soybeans shed 3%.

Intertek, the cargo surveyor, came up with further bearish news, that Malaysia's palm oil exports in August slid 4.9% to 1.33m tonnes, after four months of rises.

Kuala Lumpur's benchmark November contract slipped 3% before recovering some ground to close the morning session down 46 ringgit at 2,324 ringgit.

Wheat crop improves

Back in Chicago, wheat had the headwind of a big improvement in official opinions of the US crop to deal with.

The weekly US Department of Agriculture crop progress report bracketed 75% of the crop as "good" or "excellent", a three-point improvement over the week.

The crop's excellent health has taken the sting out of a late harvest, with only 38% of the US spring wheat crop in the bin thus far, less than half the normal rate.

December wheat lost 0.25 cents to $4.98 ½ a bushel, although the September contract recovered from negative territory to stand 0.25 cents higher at $4.71 ¼ a bushel.

That, and decent US weather, undermined corn, which dropped 2 cents to $3.26 ¼ a bushel for September delivery and 3 cents, to $3.26 ¾ a bushel for December.


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