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Morning markets: dollar helps crops to firm start

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A slipping dollar helped crops make a firm start to the week, with trading overshadowed by the prospect of a key US crop report later in the week.

The dollar eased 0.4% against a basket of currencies, a decline attributed by traders to last week's decent US unemployment data encouraging investors to switch into riskier assets.

However, it wasn't obvious many of them were snapping up Chicago food commodities, which made only small gains.

Palm shoots

Kuala Lumpur palm oil was an altogether better performer, adding 1.1% as of 2,698 ringgit a tonne as of 07:45 GMT to challenge a two-month high.

Traders said that the rise of a vegetable oil used in part for making biofuels reflected firmer oil, which was also supported by the weaker dollar. Greenback depreciation makes assets denominated in it, such as many commodities, appear cheaper.

However, there has also been an apparent lack of selling by producers into a palm market which is turning tighter thanks to seasonal factors exacerbated by a hangover from inclement weather.

Furthermore, investors are expecting bullish numbers from a key report by the Malaysian Palm Oil Board on Wednesday, with the sector also this week facing a key conference, organised by Bursa Malaysia.

Key report

Chicago, and indeed world, crops also face a much-watched report on Wednesday, with the US Department of Agriculture's latest global crop supply and demand data.

Many observers think that this may inspire some kind of bounce in prices, as investors cover short positions evident in particular in wheat.

"Yet again, [the] market could be in for short covering ahead of [the] USDA report," Kim Rugel, at broker Benson Quinn Commodities, said.

Investors actually widened net longs in corn last week, regulatory data showed, amid some expectation of damp spring sowing conditions which could turn farmers to soybeans, which are planted later.

Wednesday's report is viewed as likely to prove of particular incident for corn, with the USDA revising its estimate of 2009-10 corn production for the impact of the late harvest.

Investor 'frustration'

Nonetheless, some investor fatigue is showing at apparently aimless trading patterns, amid what has been something of a pause in ground-breaking news on crop supply and demand fundamentals.

"The frustration of this back and forth trade with little logic is getting to the old time traders as more and more step to the sidelines or just plain old get out," Rugel said.

At least crops were higher at 07:45 GMT, with wheat for March added 3.75 cents to $4.86 a bushel, and the May lot 2.25 cents to $4.95 ¾ a bushel.

Corn was 1.5 cents higher at $3.66 ¼ a bushel for March, and up 2.5 cents at $3.78 a bushel for May, creeping back above the 20-day moving average.

Soybeans gained 2.25 cents to $9.37 a bushel for March and 3.5 cents to $9.46 ½ a bushel for May.


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