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Morning markets: crops ease as fund doubts grow

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Crops started easier on Tuesday, amid some thought that the rally in the last session had gone too far.

External signs were pretty neutral, with the dollar steady, oil lower, but Shanghai shares showing gains of 1.2% as of 07:20 GMT.

However, sentiment for food commodities was nonetheless cautious, with traders concerned for the persistence of the fund buying which fuelled gains of more than 4% in Chicago corn and wheat on Monday.

The spree could prove long-lasting if sparked by an investment theme, such as concerns for rising inflation.

Fund shake-up

However, many observers believe the purchases may have been a one-off technical phenomenon, representing simply first-day-of-the-month trades. Similarly, losses on Friday were viewed as being fuelled by an end-of-October book clear out.

Some traders also questioned whether investors might not be feeling more confident now that two huge Deutsche Bank commodity funds should have finished a shake-up of positions prompted by tighter regulatory concerns.

Deutsche's Powershares DB Agriculture fund ended Monday with positions pretty much in line with weightings implied by the index it is designed to follow, if slightly underweight in wheat.

Wheat for December stood 3.75 cents lower at $5.13 a bushel, with December corn down 4 cents at $3.78 ¼ a bushel.

November soybeans dipped 3.5 cents to $9.94 a bushel, with the better-traded January contract down 4.75 cents at $9.93 ¼ a bushel.

Palm eases

In Kuala Lumpur, palm oil continued to be undermined by concerns of a large rise in output last month in Malaysia, the second biggest producer of the commodity after Indonesia.

Production, which typically rises toward the end of the year, is believed to have shown a stronger uptick than previously expected when tree stress from a bumper harvest last year and potential El Nino damage were seen as more significant threats.

The Malaysian Palm Oil Board will next week unveil October palm oil exports, production and stocks data.

The benchmark January palm oil contract closed the morning session on the Bursa Malaysia Derivatives Exchange down 12 ringgit at 2,196 ringgit a tonne.


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