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Morning markets: China share dip halts crop rally

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Another sell-off of Chinese shares put a halt to the rally in agricultural commodity prices, although crops remained well above levels of24 hours before.

The drop in Shanghai stocks, which stood 5.3% lower at 06:15 GMT, sent a shiver through financial markets. China is viewed by economists as a crucial driver to pulling the world economy out of recession.

Other Asian stockmarkets fell, with Tokyo's Nikkei index closing down 0.8%, while New York crude, which set a 10-month high on Monday, was 1.0% lower at $73.61 a barrel.

China drought fears

The falls encouraged a spot of profit-taking in crops, after a Monday which gave near-term soybeans their best day for four weeks, with a jump of 5.6%.

Still, the declines remained measured, even in soybeans, whose jump was fuelled by hopes of further strong Beijing buying, as well as rumours that drought in China may be worse than had been thought, limiting prospects for domestic harvests.

September soybeans slipped 5 cents to $10.75 a bushel, while the November contract fell back through $10 a bushel, losing 10.5 cents to $9.97 a bushel.

Crops improve

Upbeat US crop progress data added another reason for investors temper their hopes, with the condition of corn and soybean crops improving last week.

September corn lost 3 cents to $3.26 ½ a bushel, with the December lot down 3.75 cents at $3.31 ¾ a bushel.

Wheat did a little better, losing 1.75 cents to $4.70 for September while the December contract lost 2.25 cents to $4.97 a bushel, after on Monday once again seeing its grip on $5 a bushel slip.

The condition of the US spring wheat crop, for which harvest is underway, slipped last week, with the proportion rated "good" or "excellent" falling by two percentages points, albeit to a historically high 72%.

Palm exports

In Kuala Lumpur, palm also gave back gains. The benchmark November contract closed the morning session on the Bursa Malaysia Derivatives Exchange down 15 ringgit at 2,360 ringgit per tonne in high volume.

The fall, which gave back half of the contract's gains on Monday, was blamed on weak export data, beside the slide in Shanghai shares.

Exports of Malaysian palm oil products fell 10.5% to 1.0m tonnes in the first 25 days to August, compared with the same period in July, Intertek Testing Service, the cargo surveyor, said.


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