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Morning markets: crops freeze as funds fox traders

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Crops' downswing drew pretty much to a halt on Thursday, helped by a weaker dollar, although sentiment remained nervous after funds so notably failed to turn up at the start of December, as had been expected.

"Money flow is wreaking havoc in these markets with investors seeming to be moving away from the tried and true trends of new month buying in three day moves," Kim Rugel at Benson Quinn Commodities, said.

"Even the most seasoned traders are stepping to the sidelines due to this extreme volatility and lack of logic in daily price action."

The trend "will now only become more amplified as the index funds start to rebalance positions and either book year-end profits or dress-up statements. Be cautious, stay hedged".

Indeed, Justin Kelly at eHedger, strayed towards bearish territory, saying that while he had "no idea" over funds' next move "without more investment money flowing into our markets, the grains will have a hard time holding these lofty levels".

Dollar and oil

Still, in Asian trading hours, Chicago crops at least had a weaker dollar to help them.

The greenback fell back to a little beyond $1.51 against the euro after Bank of America said it would repay $45bn of taxpayer bailouts, boosting optimism over the progress of global economic recovery.

Oil was in better form too, edging 0.5% ahead to nearly $77 a barrel at 07:30 GMT after a drop on 2.3% on Wednesday following data showing a larger-than-expected rise in US crude inventories.

Soybeans showed the biggest gains, adding 9 cents to $10.43 a bushel, with corn also in positive territory, up 0.5 cents to $3.92 ¼ a bushel for December.

The better-traded March corn contract was 1.25 cents to the good at $4.07 ¾ a bushel.

March wheat was unchanged at $5.76 a bushel, with the spot contract down 1.75 cents at $5.52 ¾ a bushel.

Weight of stocks

In Kuala Lumpur, palm oil was less resilient, dropping 15 ringgit to 2,474 ringgit a tonne for February delivery, after Oil World boss Thomas Mielke repeated a warning over robust inventories.

Stocks of 1.9m between Indonesia and Malaysia raised doubts as to whether current price levels were justified, he said, while adding that the outlook for next year looked better as inventories were drawn down.


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