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Morning markets: crops start 2010 on bright note

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Crops got off to a bright start to 2010, helped by expectations of significant fund buying to come in the next couple of weeks.

While the dollar edged a touch higher, making dollar-denominated assets such as crops a little more expensive, all eyes in farm commodities markets are on the prospect of fund reweightings.

US traders believe funds are poised to purchase 60,000 contracts across the agricultural complex in the reweighting process, where holdings are readjusted to base ratios - meaning investments in better performers, such as oil, are clipped and those in laggards, such as Chicago's big three crops, increased.

Fresh money at the start of the year, and month, is also viewed as helpful.

'Very important month'

"Many people are expecting large allocations of money the first half of January," Justin Kelly, at US broker eHedger, said.

However, he also forecast a "dramatic" rise in selling early in the year by farmers raising cash to pay tax bills.

As Tim Hannagan at PFG Best, also noting a key Washington agriculture report next week, said: "The first 12 days of January will be very volatile as it always is as New Year money allocations swarm about."

Mr Kelly added that January would be a "very important month and the information we receive will help structure our market for 2010".

Chicago wheat for March stood 6.5 cents higher at $5.48 a bushel at 07:45 GMT, with corn up 4 cents at $4.18 ½ a bushel and January soybeans 11.25 cents up at $10.51 a bushel.

The better traded March soybean contract was 9.5 cents higher at $10.58 a bushel.

Chinese demand

Kuala Lumpur palm oil was also a touch higher, helped by a 2.0% jump to a six month high in soyoil on China's Dalian exchange.

China is the biggest buyer of Malaysian palm oil, for which soyoil is the main rival.

And many traders are expecting Chinese demand to remain strong as it restocks ahead of its New Year celebrations next month.

A firm start by crude oil, which was up 0.9% at $80.04 a barrel, also helped. One of palm oil's major uses is in making biofuels.

The benchmark March contract stood 9 ringgit higher at $2.672 ringgit a tonne.

By Agrimoney.com

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