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Morning markets: crops dragged up by broad rally

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Grains, oilseeds and, in particular, softs had a better day, helped by a burst of optimism which helped many markets higher - while, naturally, undermining the dollar.

The spark for the improved sentiment, which drove New York and London shares to fresh 2009 highs, was a positive interpretation on a batch of Chinese data, plus, ironically, comments from several US central bank officials that the course of America's economic revival would remain choppy.

That signalled that US interest rates would remain low, a boon for borrowing companies.

"Many believe a combination of low interest rates along with barrage of new money are causing a stock market rally despite otherwise negative economic indicators," MF Global grains commentator Joe Vaclavik said.

However, low interest rates mean poor yields for lenders, so weakening demand for the dollar and making US exports, such as food commodities, cheaper to buyers in other currencies.

The dollar dropped to a fresh 15-month low against a basket of currencies. The euro hit $1.5048 at one point.

Sterling effort

One currency which even managed to outfall the dollar was the pound, which fell more than 1% to $1.6545 by 19:40 GMT after a Bank of England report signalled that interest rates would remain low for a while, despite decent prospects for economic recovery.

Against the euro, sterling dropped to E1.1052.

That helped London commodities close firm. January wheat added £0.65 to £107.50 a tonne, with the March contract ending up £1.15 at £110.90 a tonne.

The effect was seen in cocoa, which ended up 3.1% at $2,089 for December delivery, outpacing a 2% rise in New York's best-traded March contract.

Coffee also too managed to do better in London, where robusta beans ended up 1.3% at $1,335 a tonne for January delivery, while New York arabicas for December closed down 1.0% at 132.70 cents a pound.

'Long liquidation'

And in grains? Chicago managed a mixed close, disappointing some observers.

"Profit taking and long liquidation hit the market at the close, turning some pits lower for the day while trimming the days gains in others," Vic Lespinasse at GrainAnalyst.com, said.

Funds had been seen as buyers of 3-4,000 corn and wheat contracts and 1-2,000 soybean lots with some time yet to go.

If there was a reason among fundamentals to get bearish, it was the prospect of decentish weather for the delayed harvest.

"Soybeans will be mostly harvested by mid next week so the weather will not be as important but corn harvesting will still be in full swing so the weather will still be very important for this crop," Mr Lespinasse said.

Growing yields?

US Commodities, in Iowa, said: "The forecast remains harvest friendly for the next 10-12 days," adding that "the favourable weather in November could again help the yields grow".

Corn eased 0.5 cents to $3.94 a bushel for December delivery.

Soybeans for November added 2.25 cents to $9.63 ¾ a bushel with the better-traded January lot adding 4 cents to $9.72 a bushel.

Wheat did best, closing up 8.75 cents at $5.31 ¾ a bushel for December delivery, its best close for more than two weeks.

Sugar squeeze

Back among softs, sugar achieved a standout performance after an industry official said that India – which was a sugar exporter until last year - may still be importing the sweetener in 2010-11.

Prakash Naiknavare, managing director of Maharashtra State Co-operative Sugar Factories Federation, said that India may produce 19m-20m tonnes of sugar in 2010-11m, short of consumption of 23m tonnes, necessitating some 2.5m-3m tonnes of imports.

Raw sugar closed up 3.5% at 22.67 cents a pound in New York, for March delivery.

By Agrimoney.com

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