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Morning markets: crops drop as budget fears spread to the US

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Sellers got back to work on Monday, pushing prices in the range of risk assets lower, including most agricultural commodities.

Even

palm oil

, the farm commodity market's recent darling, which set a fresh five-month high in the last session, fell back as the worries over unbalanced state budgets spread from the eurozone to the US.

The US having, not unreasonably, criticised the eurozone over its slow implementation of debt reduction plans, looks to have encountered another impasse between Democrats and Republicans, on the so-called supercommittee set up to come up with plans to cut the budget deficit.

Shares

fell 0.3% in Sydney and Tokyo, and

oil

eased too, by 0.9% for West Texas Intermediate, despite the renewed Middle East unrest in the form of clashes between Egyptian protesters and police, and against a background of a stable

dollar

.

Oil's dip, as well as profit-taking, hardly helped palm oil, much of which is used in making biodiesel, which dropped 0.3% to 3,237 ringgit a tonne in Kuala Lumpur as of 08:15 GMT for February delivery – failing for the first time in 14 sessions to set an intraday high above the previous day's.

'Rains will bypass drought areas'

The selling mood engulfed even

wheat

too despite some positives on the fundamental side over the weekend.

For a start, the "will-it-won't-it rain" weather forecasts for the southern Plains, where winter wheat seedlings need moisture, took a turn for the drier.

WxRisk.com said that, as of late Sunday, there were "scattered light showers" over north eastern Texas, but the region was otherwise pretty dry over the weekend. (There was up to six inches of snow in parts of Wyoming and South Dakota.)

And two rain systems forecast for the next 10 days "will bypass drought areas of western and central Texas, Oklahoma and Kansas", if reaching easterly parts of those states.

Buying spree

On the demand side, Egypt over the weekend purchased a healthy 240,000 tonnes of wheat, its biggest usual order size, if from the Black Sea rather than the US, (which again failed to show up in the tenders).

Egypt, the world's top wheat importer, bought 180,000 tonnes from Russia at $249 a tonne, and 60,000 tonnes of optional Black Sea origin wheat, at $247.69 a tonne.

And Syria on Sunday chipped in with an order for 100,000 tonnes of soft wheat, any origin, while Algeria is near to breaking wheat import records for a calendar year, Thomson Reuters calculations show, with buy-ins of 6.35m tonnes up to the end of October, compared with a full-year high of 6.9m tonnes set three years ago.

Furthermore, on technical, regulatory data released late on Friday showed speculators near-record net short in Chicago wheat. Large short holding can make speculators reluctant to sell more, for fear of being caught out by a wave of position covering.

Still, trapped by the headwinds, Chicago wheat for December shed 0.5% to $5.95 a bushel.

And that was little help to

corn

, which did not have short-term help on fundamentals to count on, and lost 0.7% to $6.05 ¾ a bushel for December - getting nearer the $6-a-bushel mark which is so psychologically important for the grain - besides being seen as a rough trigger point for Chinese buying.

'News isn't horrible'

Thinking of China, the country's recent purchases of US

soybeans

provided some support to the oilseed.

"China bought US soybeans last week, thus the news isn't horrible," Mike Mawdsley at broker Market 1 said.

Still, "with the window to step up soybean exports due to the possibility of less competition from South America closing, the few remaining bulls are leaning on growing conditions in South America turning less favourable", Brian Henry at Benson Quinn Commodities said.

"As it stands, growing conditions in much of this region have been quite good, but Argentina has been trending a little drier."

Soybeans for January eased, but retained their relative strength over grains, dropping 0.4% to $11.64 a bushel.

'Rubber will bounce'

Elsewhere,

rubber

dropped again in Tokyo, losing 0.6% to 262.60 yen a kilogramme, after a weekend meeting of the three main exporters of the tyre ingredient, Thailand, Indonesia and Malaysia, failed to come up at a meeting on Saturday with plans to support prices.

The states said that they did not see any immediate need for intervention, believing seasonal effects would soon kick in to buoy prices.

But New York

cotton

managed some upward movement, if by only 0.04 cents to 94.85 cents a pound, on what promises to be a nervy day for the fibre, which is trading certainly at the bottom of its recent trading range, and may have fallen through the floor.

By Agrimoney.com

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