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Morning markets: ags hold firm, showing defensive traits

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Markets took on further fright on Thursday as the next scene of the Greek euro tragedy unfolded.

In this one, European leaders are demanding that the country, having unveiled a referendum on a hard-fought rescue package, make a decision on whether it wants to stay in the eurozone.

The uncertainty, which looks likely to last at least a month (the earliest date for a referendum in early December), sent many markets into retreat again, with Tokyo

stocks

tumbling 2.2% and Seoul shares 1.5%, and European stockmarkets opening lower.

(Some investors cited a downgrade by the US central bank to forecasts for the domestic economy, although that did not seem to worry Wall Street investors, with the Dow Jones Industrial Average share index closing up 1.5%.)

The

dollar

resumed its upward path, as befits a favoured investor safe haven, adding 0.3% against a basket of currencies, so making dollar-denominated assets such as many commodities less competitive as exports.

Copper

dropped for a third day, while Brent

crude

stood 0.9% lower, and fell below $108 a barrel earlier on.

Harvest disruption

So could agricultural commodities find succour in their defensive characteristics being, as food sources, a necessity whatever the economic climate?

Well they were doing better than many other assets as of 08:40 GMT. Indeed, many were showing small gains, s

oybeans

being one.

in part on forecasts for rain which will disrupt the late US harvest (and have implications for wheat too).

"The overall [weather] pattern is looking a lot more active as you move into November," forecasters at WxRisk.com said.

Over the next two weeks "the potential exists for two major winter storms to affect the upper Plains and significant rain to affect portions of the central Plains and the Midwest".

'Regaining some competitiveness'

But investors are getting a little less downbeat on US exports of soybeans too, with Oil World earlier in the week questioning how much longer rival South America could keep up a strong pace of shipments.

And at Australia and New Zealand Bank, Victor Thianpiriya on Thursday noted that the spread between Brazilian and US supplies had narrowed in America's favour.

"US soybeans are regaining some of the international competitiveness lost to South America," he said.

The size of the gain in Chicago's January soybean contract, of 0.5% to $12.08 ½ a bushel, is unlikely to dent that too much.

Data later

Indeed, the comments co-incide with a fresh round of rumours that China has been buying US again, and investors are expecting a better performance in US weekly export sales data due later than the 255,000 tonnes managed last time.

A figure of 450,000-750,000 tonnes is expected for the latest week.

Better sales are expected in

corn

too, of 400,000-600,000 tonnes, from 362,000 tonnes last time, and in

wheat

of 350,000-450,000 tonnes, up from 317,000 tonnes.

Rain for the Plains

And these grains were not faring too badly either, with corn up 0.1% at $6.45 ¾ a bushel for December, with expectations of higher Mexican imports, as revealed by Agrimoney.com on Tuesday, gaining traction.

Wheat for December was up 0.2% at $6.24 ½ a bushel, despite feeling some pressure from those US rains, which look set to boost prospects for the drought-pressed hard red winter wheat crop in the southern Plains.

Rains heading into mid-November especially "look to produce significant rain over a good portion of the lower Plains", WxRisk.com said.

And Kansas hard red winter wheat lagged, up 0.5 cents at $7.13 ½ a bushel for December.

'Crop development at stake'

On the more supportive side for wheat investors are rains in Western Australia, Australia's top grain-growing state, where they are not so helpful, given the ongoing harvest.

"A much-wetter-than-normal few weeks in the Geraldton zone has already caused harvest delays and reports of grain quality downgrades have already started to filter through," Luke Mathews at Commonwealth Bank of Australia said.

Meanwhile, dryness looks to remain an issue for Ukraine, with its drought-tested winter grains set to stay dry for the next 10 days.

"Dry conditions have prevailed in most producing regions since September and crop development is at stake," Agritel's Kiev office said.

"At the end of September, soil moisture content in the country was at its lowest level for 10-15 years."

'Key data release'

Elsewhere, New York

cotton

continued its decline, falling 0.6% to 97.75 cents a pound for December delivery, its fortunes fading with those for world economic growth. Cotton, as a non-food farm commodity, is seen as less defensive.

US weekly export sales later "will be a key data release" for the fibre, Luke Mathews said.

"The challenge is to back up the previous week's strong result, 385,000 running bales, with another good result."

'Export prices may rise sharply'

But Chicago rough

rice

set course for a fifth straight negative close, amid fading fears for the impact of floods on shipments from Thailand, the top exporter.

Abah Ofon at Standard Chartered flagged a "risk that export prices may rise sharply in November and December as importers try to book shipments after the floods.

"However, any rally in rice prices will be limited by Thailand's adequate rice stocks, as well as India's recent return to the rice export market."

Rough rice for January eased 0.3% to $16.305 a hundredweight in Chicago.

By Agrimoney.com

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