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Morning markets: demand hopes help corn higher

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Corn led the Chicago pack on Thursday, helped by some continued optimism over the relatively tight market portrayed in a US Department of Agriculture report.

The backdrop was generally helpful to financial markets after the US Federal Reserve said that the country's economy was showing signs of levelling out, two years after the global financial crisis began to set in.

The greenback did its bit, weakening a touch as it has, ironically, tended to during the crisis on good US data. That helps dollar-denominated commodities by making them look cheaper as exports. The euro stood at $1.4260 at 06:15 GMT, some 0.2% up on the day.

Oil was firm too, helped both by the dollar and the improving economic sentiment, which bodes well for demand for commodities. New York light crude for September added 1.1% to $70.92 a barrel.

Tokyo shares closed up 0.9%, following a round of equity market gains.

'Strong hopes'

In Chicago, corn added 2.75 cents to $3.33 ½ a bushel for the September contract, continuing to chalk up gains following the US Department of Agriculture supply and demand report on Wednesday.

While the report raised forecasts for US production, thanks to the second-highest yields ever, it also added to the demand picture, largely thanks to better consumption from ethanol plants. (Cf oil, above.)

"Obviously, the corn crop size is large," Garry Booth, a trader at MF Global Australia, told Reuters, the news agency.

"However, the demand is better than expected, and given the weakness in the US dollar, there are strong hopes for good exports in corn as well as soybeans.

"Price-wise we are seeing corn and soybeans at a very competitive level."

Revival act

Indeed, soybeans were also a touch higher, up 0.5 cents at $12.18 a bushel for August delivery and 9.25 cents to $10.53 ¼ a bushel for the better-traded November contract.

The USDA report cut estimates for US soybean production, although this had been expected by traders.

Still, they were overtaken by wheat which recovered from a soft start to stand at $4.91 bushel, up 0.75 cents on the day.

Revivals are becoming something of a speciality for wheat which on Wednesday rebounded from a year low of $4.76 ¼ a bushel to close at $4.90 ¼ a bushel – a 3% bounce.

The crop is bedevilled by forecasts of a bumper global crop at a time when stocks are already high.

Profit-taking

In Kuala Lumpur, palm oil too bounced from an intraday low of 2,446 ringgit a tonne, but not by enough to help the benchmark October contract end the morning higher.

The contract reached lunch down 5 ringgit at 2,455 ringgit a tonne, with profit-taking blamed for the decline. Palm oil has rebounded by about a quarter from a low a month ago.

"The fundamentals currently support prices at this level but the market is anxious to test 2,500 ringgit and with the absence of fresh leads, investors are being cautious and taking some profit," a trader said.

By Agrimoney.com

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