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Morning markets: crops add weight to ideas of price floor

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Today is December 13th. Unlucky for some.

If anyone believes last week's European summit to try to resolve the euro debt crisis was anything more than a damp squib, ratings agencies keep piling on more cold water.

After Moody's said the crisis remains in a "critical and volatile stage", Fitch forecast a "significant" economic downturn in Europe, and warned that the debt woes were likely to continue throughout 2012.

And, with a warning from Intel that component supplies had been disrupted by the Thai floods, leaving the chipmaker's fourth quarter revenues set to miss targets, Asian


put in weak performances.

Tokyo stocks ended down 1.2%, Seoul shares down 1.9% and Sydney stocks 0.7% lower, with Shanghai shares shedding 1.9%.

Corn floor?

At least, from commodity bulls' perspective, the


rally stalled, with the greenback stable against a basket of currencies as of 08:40 GMT.

And that helped crops to show more of their recent mettle, continuing to raise hopes of a stabilisation after the correction since the start of September.



, for instance, Brian Henry at Benson Quinn Commodities said that "the trade shows little interest in pressing the price of corn near the recent lows.

"The corn market seems content to trade in the range carved out over the course of the last couple of weeks.

"It appears the end user is willing to provide a bid on lower trade," limiting downside, although "a rally from these levels is going to require short covering by the speculative community", which has not looked on the cards for now.

Mike Mawdsley at broker Market 1 said that "we need to see the market reject lower prices on negative news" for a real bullish sign.

Export market

Mr Henry added that, for Chicago's March corn contract, the $5.85-a-bushel level, which held after the US Department of Agriculture's bearish crop report on Friday, "remains a key point".

And the lot held above that level, adding 0.1% to $5.94 ½ a bushel.

Still, that was not enough to outpace


, which gained 0.2% to $5.95 ¼ a bushel for March, adding another wafer into its premium.

Some analysts foresaw a benefit from continued low Danube water levels, which are hampering grain shipments from eastern Europe.

"Competitive prices of grains from this region have undercut US grains export in 2011 and this could prompt importers to switch to US grains if the situation does not improve further," Lynette Tan at Phillip Futures said.

An indication of the status of physical wheat markets will be gained later with the results of the latest Egyptian tender, with some talk of Russia (which is not affected by the Danube transportation problems) lowering its prices to get back into contention with Argentina.

Jordan is also out with a wheat tender for 100,000 tonnes, and the same amount of feed barley.

Dry weather


, meanwhile, remained in contention thanks to the lingering concerns about dry weather in parts of Brazil and, especially, Argentina.

Over the next week, "all of Paraguay, south east Brazil and all of central eastern and northern Argentina will see only 25% of normal rainfall," weather service said.

In Brazil, while central areas will see "200-300% of normal rainfall, Bahia will see only 25-50% of normal rainfall".

Soybeans for January eased 0.25 cents to $11.11 ¾ a bushel.

'Follow-through selling'


, however, remained on the back foot after its drubbing in the last session, shedding a further 0.3% to 86.91 cents a pound, earlier touching 86.63 cents a pound, the lowest for a spot contract since August last year.

The drop was on "follow-through selling from the USDA report on Friday which increased world cotton stocks by 2.7m bales", Paul Deane at Australia & New Zealand Bank noted.


palm oil

gained 0.4% to 3,009 ringgit a tonne, despite official data showing Malaysia's November stocks of the vegetable oil at 2.07m tonnes, higher than the 1.96m tonnes the market had expected, if down 1.5% month on month.

However, the data also showed greater-than-expected exports, at 1.66m tonnes.


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