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Morning markets: crops make attempt at a Turnaround Tuesday

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The Turnaround Tuesday idea beloved by Chicago traders would dictate a better day for agricultural commodities.

The belief is that a strong trend in crop futures on a Monday often reverses the next day.

And so it did, by 08:45 UK time (07:45 GMT) at least, although the strength of the rebound was hardly in proportion to losses of the last session.

Corn

for May, for instance, added 4.0 cents to $6.75 a bushel, compared with a decline of 18.50 cents in the last session. The new crop December lot at least managed to make it back over $6.00 a bushel, by 0.75 cents.

'News not good'

But then there were reasons for investors to tread carefully. Many riskier assets had a bit of an off day, amid reviving concerns about Japan's nuclear crisis.

Take shares, which fell 0.2% in Tokyo and 1.0% in Shanghai.

"The Japan news is not good," Mike Mawdsley at Market 1 said.

"Now there are concerns that unloading commodities in China may be affected by the nuclear problems. What next?"

'Corn area huge'

At least

dollar

-denominated assets had some support from a weaker greenback, which eased 0.2% against a basket of currencies amid a slight recovery in the euro, after Jean-Claude Trichet, the head of the European Central Bank, said that inflation in the eurozone was "durably" above target, implying that an interest rate rise may be on the cards as soon as April.

A weaker dollar helps dollar-denominated goods by making them more competitive as exports, and it limited copper's fall to a smidgen.

Still, as far as a turnaround Tuesday in Chicago went, it still meant fighting against recalcitrance by investors ahead of much-anticipated US planting and crop stocks reports from the US Department of Agriculture on Thursday.

"US corn area is expected to be huge, and there are fears that stocks could surprise to the upside, "Luke Mathews at Commonwealth Bank of Australia said, pointing out that selling pressure from speculators may yet have further to run, despite a fall in their net long position to the lowest since August.

"Despite a reduction in long positions over the last month, speculators still have a larger long position in the Chicago corn market than they did back in 2006-07."

'Song remains the same'

Corn's better performance helped

wheat

to rise too, by 0.7% to $7.30 a bushel in Chicago and the same to $8.54 a bushel in Kansas, and show some reaction to its continuing weather concerns, notably over dryness in the US south Plains.

"The precipitation that moved through the hard red winter wheat belt this past weekend favoured the more northern and eastern parts of the belt, once again missing the panhandle regions of Texas and Oklahoma as well as south western Kansas," Dave Lehl at Benson Quinn Commodities said.

"The song remains the same, as weather events continue to cross through the region but favouring the more northern and eastern parts while missing the drier areas."

In fact, official data out overnight showed the condition of Kansas winter wheat improving, but that in Texas back on the decline.

European fears

Dry weather in Europe too is still raising its profile, and indeed helped European contracts to a relatively firm performance on Monday.

Paris-based Agritel said: "The dry conditions in France and in the northern regions of Europe are still a concern among market operators, as only little rainfalls are forecast for this week.

"The situation is not disastrous for now, but the tight fundamentals leave no room for weather adversities on the 2011 harvest."

Mr Mathews summed it up: "Wheat prices are being influenced by poor weather conditions in many regions, particularly the US Great Plains, and expectations that world wheat area will increase sharply in 2011.

"Over the next month the medium-term impact of these conflicting forces will become clearer."

Oil slide

Soybeans

, meanwhile, maintained their knack for moving in the same direction as the grains, but less so, linked in part by the oilseed's particular battle against corn for US acres.

Chicago's May lot added 0.3% to $13.52 a bushel, with the new crop November contract adding 0.2% to $13.45 a bushel.

Palm oil

didn't help the oilseeds complex, having another down day in Kuala Lumpur, where the benchmark June contract fell 0.7% to 3,259 ringgit a tonne, not far off its four month low, and well below the near-4,000 ringgit levels reached last month.

The vegetable oil's price is being weakened by soft data on exports from Malaysia, the second-ranked producer, at a time when production hopes are rising with the decline in the La Nina weather condition.

Flood warning

Rubber

, however, had a better day, eventually, closing 2.1% higher at 418.00 yen a kilogramme for Tokyo's benchmark September contract.

The tyre ingredient has been hurt by the potential for slower world economic growth, and therefore car purchases, following Middle East tensions and the disaster in Japan, where power cuts cast a shadow over vehicle production too.

"Nevertheless, the rubber prices may be supported due to seasonal [factors]," Ker Chung Yang at Phillip Futures in Singapore said.

"The Thai Meteorological Department issued a flood warning for southern Thailand, with 'risk areas' include some major rubber-producing areas such as Surat Thani and Nakhon Si Thammarat."

By Agrimoney.com

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