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Morning markets: crops' resilience falters as shares tumble

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Could the closure of US markets for Labor Day put bears on the back foot in broader financial markets on Monday?

No chance. Tokyo shares closed down 1.9%, and Seoul stocks down 4.4%, on their first chance to react to Friday's poorly-received US jobs data, which sent major European and Wall Street stock indices down 2% or more on the day.

And Europe's shares lost further ground in early deals on Monday, when London's FTSE index opened 1.9% lower, and Frankurt's Dax index down 2.3%.

Concerns about the US slipping back into recession appear only to have increased over the weekend.

Rubber drops

The selling spread into commodity markets, depressing


, which dropped 1.6% nearly to $85 a barrel, and



What farm commodity markets were open fell too. Tokyo


dropped 2.4% to 360.70 yen a kilogramme for February delivery.

The tyre ingredient is viewed as particularly susceptible to the macroeconomic concerns reflected in share market falls, being a non-food agricultural commodity more prone to changes in consumers' discretionary spending.

Its price also correlates to that of oil, the source of synthetic alternatives to natural rubber.

In Singapore, Ker Chung Yang, at Phillip Futures, also noted fears of "further monetary tightening in China", a huge rubber importer.

'Clearly unsustainable'

In China itself, even grains had a broadly negative day, despite the resilient performance by Chicago grains on Friday, boosted by an estimate from analysis group Lanworth that the US


yield would come in at 143.3 bushels per acre, and the harvest at 12.022 bushels.

The US Department of Agriculture has the yield figure at 153.0 bushels per acre, and output at 12.914m bushels.

Paul Deane at Australia & New Zealand Bank said: "Production at this level eliminates the entire 2012 carryout for corn - clearly unsustainable and indicating crop futures would have more work to do if this yield were to eventuate."

While this might be seen to affect China, whose dependence on imported corn has increased, the January contract on the Dalian exchange eased 0.1% to 2,335 yuan a tonne.


did better, up 1.3% at 2,717 yuan a tonne on the Zhengzhou for January delivery.

Sugar signal

But perhaps most noteworthy was a drop of 2.1% to 6,991 yuan a tonne in Zhengzhou


, the contract's lowest in nearly two months.

China has taken a bigger role in sentiment on sugar markets, with the country being deemed likely to take-in ever bigger imports, after running down in stocks over the last two years in the face of high international prices.

The International Sugar Organisation last week pegged Chinese imports of the sweetener rising 14% to 2.1m tonnes in 2010-11 (which ends next month on ISO accounting), and by a further 30% to 2.75m tonnes in 2011-12.

Many traders have been expecting China to enter the market this week to replenish inventories - which could, besides world economy fears, or concerns for Chinese interest rates, explain why local prices might dip.

Still, at Commonwealth Bank of Australia, Luke Mathews said that the "sugar market is increasingly focused on the expectations for big production numbers coming out of India, Thailand, Russia and others over the coming 18 months".


, for which Zhengzhou prices also hold particular interest abroad, with China being the top producer, consumer and importer of the fibre, eased 0.7% to 21,105 yuan a tonne for January.


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