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Morning markets: crop futures bask in brighter sentiment

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Maybe 2011 will not be like 2008 after all.

As of the start of the week there were some spooky similarities, with Brent


, the




standing three years ago, give or a take a few days, pretty much exactly where they were on Monday, and


pretty close.

But three years ago, as the early days of October progressed, "the Dow crashed, as did all commodities, and the dollar soared", Mike Mawdsley at Market 1 said.

This time, some resistance has kicked in, amid hopes that the European Union is getting on top of its sovereign debt crisis, and preventing it turning into banks one, and with the US economy showing signs of life.

Even Tokyo shares joined in the rally on Thursday, adding 1.7%, if still lagging other Asian stocks, with Seoul shares ending 2.6% higher, and Sydney equities up 3.7%.

Rubber bounces

Agricultural commodities could not live up to these kinds of heights, with


one of the best performers with a more modest 1.1% rise to 307.80 yen a kilogramme in Tokyo, for the benchmark March contract.

Besides being lifted by gains in oil, the source of synthetic alternatives, as Brent crude edged back above $103 a barrel, prices have been lifted by Thailand's pledge to maintain a floor price of $4 a kilogramme.

Thailand, the top exporter, has also urged Indonesia and Malaysia, fellow members of the International Rubber consortium to follow suit.

"Thailand's latest move comes after a sharp sell-off of natural rubber despite firm fundamentals," Ker Chung Yang at Phillip Futures noted, with the tyre ingredient ending August above 375 yen a kilogramme

'Legitimate need'

In Chicago, wheat was again the top performer, continuing to benefit by a retreat by speculators from the large net short position highlighted by latest regulatory data.

Indeed, the recovery in prices "points to the likelihood of heavy short-covering in an oversold market that has an extremely large net short trend-following fund position", Brian Henry at Benson Quinn Commodities said.

Fundamentally, while rains in the southern US are easing concerns over sowings of hard red winter wheat, ideas of demand are picking up too, with Morocco suspending import duties on soft wheat and durum.

"This indicates a legitimate need to get wheat purchased. Their last two tenders have not garnered any bids," Mr Henry said.

Chart signals

Meanwhile, technically, "the wheat market can go a long way towards confirming a near term bottom with a higher close", he added.

"The charts present little resistance unless we trade about 60 cents higher."

Actually, Mr Mawdsley put the 20-day moving average, at $6.66 a bushel for Chicago's December contract, as first resistance level.

Still, that leaves scope for rises, with the contract standing at $6.30 a bushel as of 07:30 GMT (08:30 UK time) up 0.4% on the day.

'Triple its corn purchases'

Corn was more cautious, amid ideas that even if China does have a huge import requirement, as seen by the US Grains Council earlier this week, it may not buy from the US.

"It is likely that China could triple its corn purchases in the crop year starting in October," Lynette Tan at Phillip Futures said

But it "seems some of that demand could be shifting to Argentina", with the two countries in longstanding talks over a market access agreement to China.

That said, there are worries about dryness in Argentina too, amid growing fears of a La Nina weather pattern resuming.

Quality question

Also on the demand side, the Philippines emerged as potentially a larger buyer of corn and wheat, after typhoon damage last week to its own crops.

"The industry wants to know the quality of corn harvested in the Philippines," Norman Ramos, the president of the Philippine Association of Feed Millers, said.

"If the quality is questionable, we're open to importing both feed wheat and corn."

Corn added 0.4% to $6.08 a bushel.

Seasonal buy?

Still, this time soybeans kept up for once, gaining 0.4% to $11.68 ½ a bushel for November delivery, amid ideas that the seasonal weakness caused by harvest pressure may be past its peak.

"It is the seasonal timeframe to find a low," Mr Mawdsley said.

US Commodities said that "seasonally soybeans, were a buy on Tuesday for 2.5-week positive window".

Data later

As for whether soybeans fulfil such expectations, US weekly export data later may have a bearing, foreseeing sales of 550,000-750,000 tonnes, down from 1.03m tonnes last time.

Wheat export sales are expected roughly in line with the previous 429,000-tonne figure, somewhere between 350,000-500,000 tonnes, with corn's forecast at 750,000-1.0m tonnes, compared with 813,000 tonnes last time.


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