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Morning markets: crops hit Turnaround Tuesday

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There is a saying in Chicago that a strong movement in agricultural commodity prices on a Monday is reversed the next day.

August 4 kicked off looking very much like one of these so-called "Turnaround Tuesdays", with crops heading off in negative territory.

Losses were not nearly enough to wipe out the gains of the last session, and indeed involved a good dollop of profit taking.

But they gave bulls cause to pause before using some positive signals as an excuse to try to set the crops rally off to a new leg.

Stocks rally

One such signal was continued weakness in the dollar, which remained near this year's lows against a basket of currencies, making US exports, including grains, look better value. The euro hit $1.4417 against the greenback, not far off a 2009 top of $1.4445.

Another was the continued rally in stocks, with Asian stocks, ex-Japan, hitting their highest for 11 months while Tokyo stocks closed up 0.2% at a 10-month high.

The revival reflected strengthening hopes of a brisk recovery from recession, particularly in the US, following relatively upbeat economic data and forecast-beat corporate results.

Corn quality

Bulls in corn might also have taken heart in official data showing the US crop had deteriorated somewhat in the last week, with the proportion rated "good" or "excellent" in the US Department of Agriculture's weekly crop progress report dropping by two percentage points to 68%.

The amount rated "poor" or "very poor" grew by two points to 10%.

While these figures still leave farmers on track for a memorable harvest, the deterioration was more than many traders had expected.

And fears that the lateness of the crop will leave it vulnerable to adverse conditions, with dry weather currently a concern in many districts, has been behind corn's rebound of more than 15% from a 2009 low hit two weeks ago.

Nonetheless, September corn stood 1.2% lower at $3.53 ¾ a bushel at 06:00 GMT.

Beans pause

The drop in soybean prices, however, looked slightly more predictable from the crop progress report, which showed steady quality in the US crop, confounding traders' expectations of a 1-2 point drop.

Chicago's August contract dipped 13.5 cents to $11.60 a bushel, leaving it nearly 20% above a mid-July low.

Wheat, meanwhile, fell back 6.25 cents to $5.43 a bushel, despite some deterioration in the spring crop's condition heading into harvest.

'Playing catch up'

Kuala Lumpur palm oil did a better job of keeping up its bullish momentum, adding 2.0% to close in on a fourth successive positive close.

Besides the draw from Monday's performance by soybeans - source of soyoil, a palm oil competitor – the Asian festival season continues to stoke hopes for increased demand and interrupted production.

"Palm oil has lots of room to play catch up with soyoil given that demand is improving around the world and especially in Asia for the festival demand," a trader told Reuters, the news agency. Benchmark October palm oil closed the morning session on Bursa Malaysia's Derivatives Exchange up 46 ringgit at 2,341 ringgit a tonne.


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