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Morning markets: crops keep up resistance against bears

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Can the weekend come soon enough?

Certainly not for those with long positions in anything looking vaguely like a risk asset.

The fears over eurozone and US debt levels, and US and global economic growth, which have put "double dip recession" firmly back into everyday jargon and turned this week into something of a bloodbath for risk assets, showed no signs of abating.

Asian shares continued the round of stock market declines, with Tokyo's Nikkei index closing down 3.7% (just short of the Dow Jones industrial average's 4.3% tumble over night), while Shanghai stocks were 2.2% lower in late deals.

External mayhem

Sure, the

dollar

was not behaving quite so firmly, adding a modest 0.2% to Thursday's gains of approaching 2% as investors ran for the cover of what is, ironically termed a safe-haven asset.

But dollar-denominated commodities, which tend to move inversely to the greenback on grounds of export competitiveness, dipped nonetheless.

West Texas Intermediate

crude

for September delivery was down 2.4% at $84.57 a barrel, as of 07:40 GMT (08:40 UK time), the lowest for a spot contract since November.

And, on metals markets,

copper

tumbled 4.2% in Shanghai, where

aluminium

and

zinc

touched limit down.

Data later

Will the sell-off continue? Much depends, short-term, on US jobs data due later.

"The US economy stands at the forefront of market concerns about growth. If the July employment report ratifies the view that the US recovery remains barely above stall speed, there is more selling to be done," Barclays Capital said.

And that looks the agenda for farm commodities too, without something truly momentous in the way of weather or trade.

"Emotion is becoming a bigger factor, and I am leery of how these markets may react, if the jobs number is bearish," Brian Henry at Minneapolis-based crop broker Benson Quinn Commodities said.

Limited declines

That said, crops were once again proving relatively firm, against the toll of damage listed above.

"With extreme pressure in outside markets, it was a miracle

corn

wasn't limit down" in the last session, Mike Mawdsley at Market 1 said.

And the December lot, even after falling a further 1.0% to $6.94 ¼ a bushel, remained above some moving average lines, providing some hope of further resistance to decline. The nine-day is at $6.90 a bushel, and 20-day at $6.80.

Soybeans

dipped 1.3% to $13.27 ½ a bushel for November delivery, given some help by Thursday's data showing US export sales of the oilseed up 82% week on week to 1.09m tonnes new crop (the figure for last harvest soybeans was negative), the best figure since January.

'Quality issues'

And

wheat

for September looked positively musclebound in dropping a modest 0.5% to $6.78 ¼ a bushel in Chicago for September delivery, no thanks to farm officials in Western Australia, who issued a reminder of the better prospects for 2011 production in Australia's top-grain growing state, following "ideal" weather last month.

"Crops throughout the region are looking excellent with no major issues threatening yields at this stage," the briefing said.

Mr Henry also reminded on the quality problems for US spring wheat, following the wet spring which has put vomitoxin back on the agenda too.

"The quality issues in the northern plains will continue to plague the Minneapolis futures contract as delivery specifications are not very stringent," he said.

And Minneapolis hard red spring wheat indeed proved less resolute, dropping 1.0% to $8.14 ¾ a bushel for September delivery.

'Demand to resurface'

In New York,

cotton

was, relatively, firm too, down 1.0% at 103.84 cents a pound, if failing to repeat its contrarian, positive move of the last session.

"Expectations of US cotton crop downgrades next week and poor Indian monsoon rains last week could explain the positive performance in the cotton market," Luke Mathews at Commonwealth Bank of Australia said.

"As long as the global economy doesn't meltdown, we believe that physical demand is likely to resurface around current prices," he added.

'Near-term bearish pressure'

But, further afield,

palm oil

could not even keep up with oilseed complex peer soybeans, falling 2.1% to 3,036 ringgit a tonne, and earlier coming within an ace of setting a nine-month low.

"We remain fundamentally bullish on palm oil prices from current levels, on expectations of an eventual pick-up in demand from China and India, firmer grain and energy prices and a moderation in fresh-fruit bunch yield in the second half of 2011," Standard Chartered said.

"Nevertheless, we expect upside to be limited by still-strong output and large stocks," the bank added, noting that "near-term bearish pressure [is] building".

By Agrimoney.com

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