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Morning markets: crops ease as fund theme ebbs

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The theme of fund buying took something of a breather on Tuesday as crop prices eased somewhat, and trading showed more of the listlessness that might be expected pre-Christmas.

Sure, there was still plenty of talk about funds' strategy.

Traders credited the rally in the last session to buying, much by funds themselves, ahead of an expected flood of money in early January which, of course, besides being a new month will mark a new year.

And funds' strategy is not as simple as snapping up any commodity.

Darrell Holaday at broker Country Futures noted talk of "fund rebalancing occurring early ahead of next year's expected rebalancing".

"Rebalancing means changing their portion of the different commodities that they own," he said.

"Rebalancing is expected to mean buying grain and selling some energy positions. This is the explanation as to why grains are higher and the energies remain stagnant to lower."

Prices slip

Still, if there was any rebalancing occurring on Tuesday, it was going the other way, with crude showing marginal gains and crops small losses.

Wheat was the best of a soft bunch at 08:00 GMT, down 0.25 cents at $5.33 ¾ a bushel for March, which is now the near-term contract.

Corn lost 0.75 cents to $4.07 ¾ a bushel for March delivery, while soybeans eased 4 cent to $10.51 for January.

Beans' loss came despite a better day for their Chinese peers, which stood 1.6% higher on the Dalian exchange.

Chinese signals

China, as the biggest importer of US soybeans, has a big say on Chicago prices, and has been giving mixed messages.

On the plus side, it has estimated that December soybean imports will hit a record high this month as some areas feel a squeeze from a shortfall in recent months.

However, it is also flagged it may release state soyoil reserves to cap prices which have continued to set year highs.

Until South America's crop comes on line next year, the US has a bit of a stranglehold over the soybean trade.

Nonetheless, prospects for Brazil are looking good, with planting running ahead, at 91% complete compared with 85% a year ago according to analysis group Celeres, despite a bigger crop.

Palm to rise?

Palm oil, a rival to soyoil in the vegetable oil market, was in better form, adding 13 ringgit to 2,526 ringgit a tonne.

Data on Malaysian exports wasn't great, with Intertek Testing Services pegging them down 9.5% in the first 15 days of the month and rival cargo surveyor Societe Generale de Surveillance putting the fall at 12.7%.

But influential analyst Dorab Mistrykept the mood upbeat by forecasting that crude prices "must rise very soon".

"Crude palm oil futures will trade between 2,800-3,000 ringgit [a tonne] by March 2010," he told a conference in New Delhi.


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