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Morning markets: dollar retreat lets crops off the hook

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The strong close to grains to the last session, which dragged them back into positive territory, set the scene for early deals on Wednesday, when agricultural commodities found a best foot to put forward.

In fact, many commodities were strong, in contrast to falls in Asian share markets, which saw Tokyo's Nikkei share index drop 2.2% and Australian stocks lose a further 1.1%.


rebounded a touch in London, while Brent


gained 0.7% to rise back above $110 a barrel, encouraged by an end, for now at least, to the


upward path, with the greenback shedding 0.4% against a basket of currencies.

Whether the dollar's decline was down to profit-taking, or relief at Japan's failure to sell the yen further, or indeed to any recovery in sentiment reducing the appeal of a safe haven investment, it improved the competitiveness of dollar-denominated assets to buyers in other currencies.

'Demand for US soybeans will recover'

And many agricultural commodities showed particular strength, with soybeans rising by 1.3% to $12.08 a bushel as of 08:30 GMT, playing a bit of catch-up with grains, which enjoyed the gains on Tuesday.

Early November buying, with month beginnings often attracting fresh money, may have helped. In the last session, Goldman Sachs was rumoured to have got its cheque book out.

The ASX reopened grain and trading too, shut for a day because of MF Global's collapse, easing concerns over the impact of the broker's bankruptcy.

But there was some fundamental reasons for support too, such as an Oil World report forecasting that a run of strong South American exports would run out of steam as inventories dried up.

"We forecast that world demand for US soybeans will recover in November and continue to rise in December and January, when most of the South American soybean stocks will have been disposed of and South American exports are seasonally small," the analysis group said.

This is after an export surge over the last two months which has lifted soybean exports from Argentina, Brazil and Paraguay "substantially by 3.2m tonnes, or 64%, from a year ago" on Oil World estimates.

'Crops are seen getting smaller'

Furthermore, FCStone overnight cut its estimate for the US soybean yield by 0.6 bushels per acre to 42.2 bushels per acre, cutting its estimate for the harvest by 46m bushels to 3,109bn bushels.

Sure, that remained above a US Department of Agriculture figure of 3.06bn bushels, up for revision next week at the latest Wasde world crop supply and demand report.

And the broker was still more upbeat than the USDA too on US


, despite downgrades of 0.3 bushels per acre to 148.4 bushels per acre in its estimate for the yield, and a cut to 12.457bn bushels in the production forecast.

But some were taking the data with a bullish twist.

"While Stone's estimates remain above USDA October numbers, their data reaffirms trades expectations that the US corn and soybean crops are seen getting smaller in next week's USDA report," Kim Rugel at Benson Quinn Commodities said.

Indeed, separately broker Allendale indeed forecast yields below USDA estimates, at 147.8 bushels an acre for corn and 41.4 bushels an acre for soybeans.

'Devastating rains'

The oilseed also gained some support from concerns elsewhere in the complex over

palm oil

, with fears that the La Nina weather pattern could bring an extra rainy monsoon period at the end of the year, disrupting harvest.

"Palm oil markets derived some support from concerns that heavy rains at the end of the year could stall harvesting and inundate estates, while export demand remains robust," Ker Chung Yang at Phillip Futures in Singapore said.

Malaysia's deputy prime minister, Muhyiddin Yassin, said that weather reports signalled rains could be "devastating", prompting the worst floods in decades.

January crude palm oil added 0.9% to 2.949 ringgit a tonne in Kuala Lumpur.

Egyptian signal

Back in Chicago, grains lagged oilseeds, and ideas of huge 2011-12 corn imports by Mexico, the second-ranked buyer, as raised by USDA attaches, received a little bit of a knock overnight when the country downplayed its needs.

Mariano Ruiz, Mexico's deputy agriculture minister, acknowledged a disappointing harvest but said that substitution of corn for other grains would keep the country's imports in calendar 2011, at least, to 8m-9m tonnes.

The attaches forecast a record 9.8m tonnes in the 2011-12 marketing year, which started last month.

Corn for December gained 0.6% to $6.58 a bushel, helping fellow grain


higher too, by 0.6% to $6.33 ¾ a bushel.

Egypt's purchase of a further 180,000 tonnes of corn on Tuesday at its third tender in a week was taken as a bullish sign by Luke Mathews at Commonwealth Bank of Australia.

"Egypt continues to signal to the market that they think current prices represent good buying [opportunities]," he said.


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