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Morning markets: crops revive after 'storm' ends

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An end to the storm in external markets helped crops seize back some ground lost in the last session, when wheat set a 2009 low and corn neared one.

The round of sharp share declines waned in Asian trading, with Tokyo's Nikkei index closing 0.2% higher helped by a 0.9% rise by 06:30 GMT in Shanghai stocks, whose weakness on Monday set investors fretting.

Oil made some headway, adding 0.4% to $67.01 a barrel. And the dollar weakened too, a sign of improving global economic confidence, besides making dollar-denominated crops less expensive to foreign buyers.

Asian demand

Still, among major crops, it was ringgit-denominated palm oil which responded best, adding 1.5% amid rising hopes for demand at a time when Malaysian output is flagging.

"China and India's consumption should surpass [that of] the US and European Union combined by 2010, while another 1bn African consumers are keen to join the global economy," CLSA said in a research note.

"Even a pick-up in [vegetable oil] harvests might not be enough to replenish stocks."

In the short-term, the market has to deal with the extra demand caused by the Asian festival season, which starts with Ramadan later this month and ends in October with China's Mid-Autumn celebrations and the Hindu Diwali festival.

Benchmark November palm oil futures added 35 ringgit to 2,370 ringgit per tonne on morning trade on the Bursa Malaysia Derivatives Exchange.

Tour findings

Palm oil's vegetable oil rival, soybeans, was leading the pack in Chicago too, as investors wondered whether the crop had not been oversold in slumping 21% in two trading days.

Bullish sentiment has been sapped by data showing waning demand by US soybean crushers, and amid concerns that China will not keep up the pace of bean imports.

Meanwhile, ideal weather has raised the prospect of a big harvest, which ProFarmer appears to have identified on the first day of a crop tour in Ohio.

Nonetheless, September soybeans recovered 0.9% to $9.97 ¼ a bushel, with the better traded November contract adding 0.9% to $9.63 a bushel.

ProFarmer identified bumper Ohio corn yields too, up more than 7%. Which was one reason why corn, as measured by the September contract, on Monday came within 0.25 cents of its 2009 low for a near-term contract of $3.04 a bushel.

Still, amid a better financial markets climate, the contract added 0.6% to $3.16 a bushel, with the December lot up 0.6% at $323 ¾ a bushel.

Slow harvest

Wheat recovered better, after official US data showed the harvest of the spring crop well behind, leaving it open to weather threats.

The US Department of Agriculture's weekly crop progress report showed that just 13% of the crop had been harvested so far, compared with nearly one-half in a typical year.

North Dakota was particularly behind, having 4% in the bin compared with 44% normally.

The delay reflects to a large part the late planting of the crop. Still, it indicates just what a hindrance that has been and leaves the crop – while currently in good health – open to deterioration.

September wheat stood 0.9% higher at $4.76 a bushel, having dropped to $4.65 ¼ a bushel on Monday, its lowest this year and within 2% of hitting its cheapest for more than two years.

December wheat added 0.7% to $5.02 ¾ a bushel.

By Agrimoney.com

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