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Morning markets: crops unmoved by share rises

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Food commodities continued to poop the party in other markets, despite Chinese economic data appearing to give an extra reason for crops to shake their stuff.

China said its economy grew at a rate of 7.9% in the second quarter, beating forecasts of a 7.1% rise and – it might be thought – triggering some optimism among commodities investors.

China is a huge buyer of metals and some crops, including soybeans, from abroad.

Shares set fair

Certainly, stock markets continued to bounce, with Australian shares adding 1.8% and Tokyo's Nikkei index up 2.2% at one point, albeit closing 0.8% higher.

The performances followed a 3% gain by New York's Dow Jones industrial average index on Wednesday.

But Chicago crops remained little changed during Asian trading hours. August soybeans stood 3.5 cents higher at $10.24 a bushel at 06:30 GMT, with September corn down 1 cent at $3.28 ½ a bushel and wheat unmoved at $5.35 a bushel.

And this time, Kuala Lumpur palm oil joined them on the sidelines, closing the morning session on Bursa Malaysia Derivatives Exchange down 1 ringgit at 2,084 ringgit a tonne.

'Sentiments still cautious'

Traders came up with a range of explanations for the lack of direction.

One was the static oil market, an important signal for crops used as biofuels. New York crude for August was $0.09 lower at $61.46 a barrel, with its London Brent equivalent down $0.11 at $62.98 a barrel.

"There's no doubt that the Chinese [economic] numbers are positive and would provide an underlying support for crude," Victor Shum, a Singapore-based analyst at Purvin & Gertz, told Reuters, the news agency.

"But sentiments are still cautious and investors are also somewhat sceptical of an economic recovery anytime soon, particularly in the US, where unemployment is still very high."

Still, at least oil enjoyed a gain of more than 3% on Wednesday, unlike most crops.

'Weather favourable'

A second factor was weather, with pollination beginning of the US corn crop and the soybean podsetting season ahead.

"As long as the weather is favourable, I don't think we have big upside potential [in crop prices]," Genichiro Higaki, at Sumitomo Corp in Tokyo, said.

He added that although US soybean stocks were small, "I don't think this tightness is a factor for new money to flow into the market. We need some additional factors for buying".

Chinese auction

Nonetheless, at least reports of China getting shot of some of its huge soybean reserves did not spook the market.

That was down to the price, reported at $549 a tonne, equivalent to nearly $15 a bushel, which looks uncompetitive for crushers, even allowing for shipping costs.

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