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Morning markets: crops struggle as dollar revives

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Wednesday began where Tuesday ended – with corn defying the weakness notable in other crops such as wheat, which set a fresh one-month low, and Kuala Lumpur palm oil, which slipped 2%.

The greenback once again provided a headwind for US commodities by making ground against other currencies, and making dollar-denominated assets less competitive.

Concern over Greece's debt downgrade by Fitch was one reason for investors to opt for the safety of the world's reserve currency. But it wasn't the only one, with Japan sharply revising down it estimate for economic growth in the third quarter, from 1.2% to 0.3%.

Pound pounded

Meanwhile, China, where shares were down 1.7% at 07:30 GMT, has begun taking a pot shot at asset bubbles, with Zhang Ping, head of the National Development and Reform Commission, warning of a crackdown on property speculation.

The dollar hit a one-month high of $1.4667 against the euro (Greece's currency as well as that of France, Germany and neighbours), which was last week worth $1.51.

Sterling was also notably weak, hitting $1.6197, its lowest for nearly two months, as the prospect of a statement from chancellor Alastair Darling highlighted the UK's fiscal difficulties.

'Harvest halt'

Corn gained some support from the storm hitting the cornbelt which promises to delay the already-tardy harvest into 2010 and ease supply pressure on the market.

Meteorlogix reported snowfalls of up to 10 inches in the north west of the Midwest, with some smaller falls on the agenda for Friday.

"Winter weather brought harvest to a halt and any remaining harvest may not occur until spring," Meteorlogix said.

Chicago's soon-to-expire December contract added 1 cent to $3.70 ½ a bushel, with March up 2.5 cents at $3.87 ½ a bushel.

'Horrible exports'

Wheat, meanwhile, looked intent on continuing a falling trend which has for five consecutive days seen it achieve lower highs, lows and closes than the previous day.

Its low so far on Tuesday, where it stood at 07:30 GMT, was $5.15 a bushel, down 11% from a high on the first day of the month.

If there is a silver lining to the decline, it is that it will save a severe rout later, as the grain succumbs to huge global supplies.

"US wheat export pace is horrible," Darrell Holaday at broker Country Futures said.

"The market will have to move lower to spur additional exports. If it does not, then it could completely melt down price-wise late in the crop year."

Dalian tumble

Soybeans had the extra trouble of a slump in Chinese soybeans to deal with.

Beans on China's Dalian exchange, which set successive 2009 highs over much of the last week, stood 1.9% lower.

Such poor news from the world's biggest soybean buyer helped send Chicago's January contract down six cents to $10.38 a bushel.

The news was even worse for soybeans' vegetable oil partner, palm oil which in Kuala Lumpur stood 1.6% lower at 2,519 ringgit a tonne for February delivery.

Profit-taking, ahead of key Malaysian data on Thursday, was blamed for the decline following a two-month bull run.


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