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Morning markets: Tuesday conjures up some turnaround feel

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Tuesday at least managed something of a turnaround feel, despite the macro-economic clouds continuing to race across the sky.

The US super-committee indeed failed to live up to its name, failing to come up with a plan for cutting the American budget deficit by $1.2 trillion.

And the gang of eurozone worries, as usual, hung around on street corners with menace, this time with the threat of a French credit rating downgrade the ringleader.

But some assets achieved some kind of rebound, even if only on bargain hunting. London

copper

was a notable winner soaring 1.5%, on hopes for Chinese buying at cut prices, while Brent

crude

climbed 0.3% back above $107 a barrel.

The

dollar

helped by edging a touch lower, making dollar-denominated assets a tad less expensive to foreign buyers, while

shares

were mixed. Tokyo stocks closed down 0.4%, but Seoul shares rose and Singapore stocks were higher in late deals.

Leader of the pack

So there was hope for agricultural commodities, even if many seemed to be having trouble converting it to actual gains.

Oats

managed, adding 1.6% to $3.04 ¾ a bushel for December as of 08:20 GMT, and distancing itself further from a one-year low reached on Friday.

And, while on low volumes, that matters as the grain is considered a leading indicator. "Oats knows," the Chicago saying goes.

'Does China show up?'

Not that

corn

was an enthusiastic follower, edging 0.2% higher to $5.98 ¾ a bushel for December delivery, and despite further evidence of demand.

South Korea's Corn Processing Industry Association said it was in the market for 55,000 tonnes of genetically modified US corn.

But of course, it is another buyer that investors are really looking for. "Does China show up on this break?" is the question many, including Mike Mawdsley at Market 1, are asking.

Or, as Jon Michalscheck at Benson Quinn Commodities put it: "Domestic stocks are tight while global stocks are adequate as long as China doesn't go on a buying binge as we enter 2012."

'Leak lower'

Soybeans, not content with the closing low set on Monday, achieved another one, falling to $11.41 a bushel in early deals before recovering some ground to stand at $11.47 a bushel, for January delivery, down 0.1%.

A drop in US exports, as measured by weekly cargo inspection data on Monday, didn't help.

"With the US export window narrowing quickly - as Brazil is expected to have exportable quantities in February, a month earlier than normal, due to rapid planting pace and favourable growing conditions - there seems little opportunity for US to make-up for current shortfall in export sales," Benson Quinn's Kim Rugel said.

"The soybean market will continue to leak lower on global recession fears with fundamentals of larger South American crops, slack export demand and growing US ending stocks weighing on the market."

La Nina latest

Indeed, prospects for South American crops have improved with rains over the weekend, which look set to extend in Brazil over the next week, if not in Argentina, which tends to suffer more amid La Nina years, and so is more of a market worry.

"The rain for the next several days appears to be over for all of central eastern and northern Argentina," WxRisk.com said.

Latest US forecasts call for the La Nina to bottom out in January-March and end by June-August.

Wheat condition

And, of course, this presents a continued threat of dryness in the US southern Plains, where recent rains have improved the condition of hard red winter wheat seedlings as many observers had hoped.

The condition of all-winter wheat stuck at a modest 50% in "good" or "excellent" health, at least better than last year, in the week to Sunday, according to overnight US Department of Agriculture data.

Focusing in on the seven hard red winter wheat states, there were statis there too, at a feeble 46% good to excellent.

"There were minor improvements in Kansas, Oklahoma, Colorado, Nebraska and South Dakota. This was offset by declines in Texas and Montana, which fell by 6 points to 31% good to excellent," Paul Deane at Australia & New Zealand Bank said.

'Well below the last three drought years'

But an index compiled by Mark Welch at Texas A&M University, which includes "poor" and "very poor" ratings too, came up with a less benign interpretation, seeing the condition of the overall winter wheat crop easing 3 points to a figure of 335.

"The index so far this fall is tracking very close to the readings of last year," he said.

"The percentage of the Texas crop rated as very poor and poor jumped back up to near 50%," with recent rains not doing much to break drought, as shown by soil moisture readings.

"Even with the improvement, the index is well below the last three drought years."

With Ukraine still worryingly dry too, and the discount to corn to support it, Chicago wheat added 0.3% to $5.93 a bushel for December delivery.

Cotton mix

Elsewhere, New York

cotton

continued acrobatics in the face of weak demand, bar some restocking by China, and a weakened technical picture, with expiry on the radar adding extra frissance too.

The December contract fell 0.7% to 90.15 cents a pound to lose its premium over the March contract, which added 1.2% to 91.51 cents a pound.

The December lot earlier touched 90.00 cents a pound for the first time since September last year.

And

palm oil's

fallback continued, falling 0.5% to 3,175 ringgit a tonne, weighed by the pressure elsewhere in the oilseeds complex on soybeans, and despite heavy rains threatening production in parts of Malaysia.

By Agrimoney.com

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