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Morning markets: crop prices creep higher - but dangers loom

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Agricultural commodities had plenty more than supply and demand basics to negotiate in early deals, but managed to come out on positive turf all the same.

For a start, there is the question that markets world over are asking – whether a European summit this weekend will finalise a rescue plan for the region, amid some lingering disagreement between France and Germany.

The uncertainty left share investors largely on the sidelines, so far, with Tokyo and Sydney

shares

closing lower, but by less than 0.1%.

The

dollar

, a safe haven, was marginally lower also as of 06:40 GMT (07:40 UK time), indicating that investors are unwilling to rock the boat much for now.

Still, there a way to go yet before the weekend, and "ahead of the euro summit, we could see fund liquidation of positions in risk assets today, adding potential pressure to

corn

prices", Lynette Tan at Phillip Futures said.

Options expiry

Then agricultural commodities face some key technical points too.

The expiry of November options is one, which can result in bizarre movements as investors balance off futures and options positions, as with coffee last month.

And, given the pricing on a crowd of puts," $12.00 a bushel is a possible downside target" for

soybeans

, Mike Mawdsley at Market 1 said.

That didn't look so likely in early deals, when Chicago's November futures lot was trading at $12.29 ¼ a bushel, up 0.7% on the day. But then the contract came within 2 cents of that level in the last session, before its late rebound.

Still, Kim Rugel at Benson Quinn Commodities urged investors to look at the corn market instead.

"If the market is going to trade based on option expiration, the attractive target may be the 9,000 December corn [contracts] open at $6.50 a bushel," Rugel said.

Chart signals

That was nearer the money, with Chicago's December futures lot at $6.55 ¼ a bushel, up 0.9% on the day.

Which kept the contract clear of another technical pointer too – its 200-day moving average, which the contract regained in the last session for the first time this month, in what would appear a positive sign.

Followers of weekly charts will also be watching to see if the December contract closes over last week's high of $6.55 a bushel, which Mr Mawdsley said, from the charts, "could lead to a test of the $6.87-6.90 a bushel mark".

Wheat

, meanwhile, faces the key technical factor of an atypical discount to corn, which is keeping the grain elevated despite poor fundamentals, with world season-end supplies on course for a 10-year high of 202m tonnes in 2011-12 on US Department of Agriculture estimates.

The grain in Chicago added 0.6% to $6.34 ¾ a bushel for December delivery, failing to prevent that discount widening a touch.

Aussie weather

As for fundamentals, what snippets there were tended to be on the bullish side, with India saying it would not allow food exports from its (huge) government stocks, with inflation remaining persistently high.

And the rising tide of hopes for Australian grains crops has stalled, with a late freeze.

"Recent frost could have potentially damaged some grain crops in south east Australia with minimum temperatures in northern Victoria and southern New South Wales up to 4 degrees Celsius below normal," Paul Deane at Australia & New Zealand Bank said.

Weather service WxRisk.com said that "temperatures over the next seven days will run a few degrees below normal over south west Australia".

And in Western Australia, the European weather model "for October 29 is developing a major rain event.

"Rainfall amounts here could be significant if the model is correct," which would at best delay harvesting, and at worst lower grain quality.

Cotton expands

Also more merciful for US futures was a better day for on Chinese markets, where farm commodities rebounded following steep falls on Thursday.

May corn added 0.9% on the Dalian, to 2,252 yuan a tonne, while May soybeans gained 1.3% to 4,251 yuan a tonne.

And

cotton

gained ground too, up 0.4% to 20,045 yuan a tonne for May – a relatively small rise, but enough to get the lot back above 20,000 yuan a tonne, after its worst-ever close in the last session.

The improvement in prices in China, the top grower, importer and consumer of the fibre, helped New York cotton gained 0.4% to 97.26 cents a pound for December delivery.

Price support?

Also in Asia,

rubber

added 0.1% to 281.70 yen a kilogramme in Tokyo, helped by talk from the International Rubber Consortium that its member states – the big growers of Thailand, Indonesia and Malaysia – were prepared to intervene to support prices, which set a one-year low on Thursday.

And Kuala Lumpur

palm oil

added 0.5% to 2,879 ringgit a tonne, for January delivery.

By Agrimoney.com

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