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Morning markets: economy jitters keep crops on the back foot

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Grains started off this week where they ended the last, in the discount bin, on what was very much a "risk off" day.

Concerns about Greek debt were still in the ascendancy, with a vote this week on the austerity measures which the government has agreed with lenders to claim a E12bn rescue package, but which Parliament has yet to accede to.

But so were fears about China's economy, a huge consumer of raw materials, after Wen Jiabao, the country's premier, said that keeping inflation under the official 4% target would be tricky, but that 5% is achievable.

And, as an extra downer, the Basel Committee on Banking Supervision agreed to tighten capital requirements for large banks, inferring more difficult loan criteria than would otherwise be the cas.

Risk off

Shares dipped on many Asian markets, with Tokyo stocks closing down 1.0%.

And, as the euro eased again, the

dollar

rose, adding 0.2% against a basket of currencies, and so acting as a depressant on prices of dollar-denominated assets including many commodities, making them less affordable as exports.

Copper

shed 0.8% in London, falling below $9,000 a tonne, while New York oil

was

1.0% lower as of 07:20 GMT (08:20 UK time), struggling to stay above $90 a barrel.

Cotton loses mojo

The weakness spread through to agricultural commodity markets, with even

cotton

, which bucked last week's downward trend, crumbling.

New York's July contract was 2.8% lower at 160.55 cents a pound, with the new crop December lot down 2.8% at 118.50 cents a pound.

Cotton is particularly attuned to what is going on China, the top producer, consumer and importer of the fibre, and where futures tumbled more than 3% on the Zhengzhou exchange.

That trumped forecasts of further hot weather in America's southern, cotton-growing states, even on the 11-to-15 day outlook, where models foresee the "Plains from South Dakota to Texas very hot and dry", according to WxRisk.com.

'Fundamentals are negative'

For

corn

-growing districts, the threat of a "heat dome" later in the week appear to be ameliorating, with the warmth looking like heading back west, leaving areas east of the Mississippi less troubled.

Further ahead, in the 11-to-15 day, one model shows the eastern Corn Belt staying "seasonally warm", with the western Corn Belt would be "in the battle zone between the" Plains and easterly areas.

Whatever, the forecast was not enough to keep corn ahead, even with a little bit of help from a mildly bullish US hog report late on Friday, showing herd numbers slightly higher than expected, and relatively firm cash markets too, with lower prices showing signs of flushing out buyers.

Corn for July delivery was 1.5% lower at $6.59 ¾ a bushel, with the new crop December lot down 1.3% at $6.23 ½ a bushel.

And with corn, which has far tighter fundamentals, flagging, wheat had no chance. Especially with prospects for wheat crops looking better.

"Fundamentals are negative as wheat harvest advances in the northern hemisphere, bringing new supplies in from the fields," said Dave Lehl at Benson Quinn Commodities.

'Major rain event'

In Singapore, Lynette Tan at Phillip Futures said: "The global crop is in generally good shape with conditions in Europe improving.

"Russia's agriculture ministry notes its grain harvest began yesterday," although some Black Sea areas, at least, are on for rain.

"In Europe weather models have held and still show a dry warm week coming up for all of western and central Europe and a major rain event for allof the Ukraine/Black Sea area," WxRisk.com said.

"This is a long duration event and will bring 80% coverage to all of the Ukraine over next seven days of 2-7 inches of rain."

Wheat dipped 1.9% in Chicago to $.6.24 a bushel for July delivery, with the Kansas equivalent shedding 1.3% to $7.38 ½ a bushel.

Spring wheat, whose prospects have suffered heavily from North American sowing delays, was relatively firm, losing 0.9% to $8.19 a bushel in Minneapolis.

Palm down

As ever, it was left to

soybeans

to keep bullish sentiment even on life support, with the July contract down 0.4% at $13.15 a bushel, while the new crop November lot fell 0.7% to $12.99 ¾ a bushel.

And technically, soybean futures are, after all, "quickly approaching oversold conditions" Benson Quinn said (not that this has helped the grains much) and there are signs that China is stepping up its buying again.

Still, it was not getting any help from its rival in the oilseed complex,

palm oil

, which in Kuala Lumpur maintained its downward trek, falling 1.4% to 3,074 ringgit a tonne for September delivery, its weakest since November.

This despite data from Societe Generale de Surveillance pegging Malaysia's palm exports up 15.1% so far this month with Intertek Testing Services, the rival cargo surveyor, putting the rise at 17.3%.

By Agrimoney.com

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