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Morning markets: dollar and oil depress crops

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The unhelpful combination of a stronger dollar and weaker oil, let alone favourable crop weather, set the scene for a soft start to Wednesday by food commodities.

The dollar rebounded from three week lows after comments from a senior China politician appeared to place plans for a new global reserve currency on the backburner.

The greenback rose to $1.4113 against the euro, from Wednesday's low of $1.4202. A strong dollar is typically bad news for prices of dollar-denominated commodities, making them more expensive to foreign buyers.

'More selling pressure'

Meanwhile, oil continued to lose ground following data showing higher-than-expected petrol stocks and fears for the global economic recovery.

New York crude for August stood $0.15 lower at $69.16 a barrel at 05:50 GMT.

"The overall economic sentiments are very weak so oil prices could see more selling pressure," Benson Wang, a trader at Commodity Broking Services in Sydney, told Reuters, the news agency.

"Furthermore, prices have also jumped more than 40% in the last quarter, so investors would be happy to lock in profits."

Weak crude is often a negative signal for food commodities too, given that many are used to make biofuels.

Corn slips again

Indeed, Chicago corn, a big ethanol feedstock, remained out of favour with investors, slipping 1.75 cents to $3.50 a bushel for July delivery and new crop contracts also a touch lower.

Corn was badly hit on Tuesday by data showing larger plantings by US farmer than had been thought, while weather in the US Midwest has also remained favourable to seedling development.

A touch of profit-taking was blamed for a slip in near-term soybeans from two-week highs touched on Wednesday. July soybeans were 11.5 cents lower at $12.47 a bushel.

However, new crop November beans managed to stay in positive territory, adding 0.75 cents to $10.16 ½ a bushel, closing the gap a little bit with old-crop contracts.

Wheat, which investors punished earlier last month, managed more consistent gains, with Chicago's July contract up 4.75 cents at $5.11 a bushel and December up 3.75 cents at $5.64 ¼ a bushel.

'Everything is very unfriendly'

While the dollar was not such an issue for Kuala Lumpur palm oil, which is traded in ringgit, the oil price and concerns of a loosening market were.

"Palm production is higher, ending stock is increasing, and we still see a lack of demand interest from anywhere," a trader said.

"Everything is very unfriendly so for me I am bearish."

Benchmark September palm oil closed the morning session down 69 ringgit at 2,190 ringgit a tonne.

"After the price broke 2,200 ringgit, it looks like it is now heading towards 2,000 ringgit for sure. It is a matter of time," the trader said.

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