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Morning markets: eurozone accord boosts ag commodity prices

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Overnight, eurozone leaders finally struck a deal on a plan to tackle the eurozone sovereign debt crisis.

And that was pretty much all investors needed to know, setting the scene for a rally in risk assets, and a 0.7% decline in the safe haven of the

dollar

against a basket of currencies.

In the

equity

space, Tokyo shares closed up 2.0%, Seoul shares up 1.5% and Sydney stocks up 2.5%.

Among commodities, London

copper

gained approaching 2%, as did Brent

crude

, as the world cheered the passing, for now at least, of a risk that threatened to depress world economic growth, and with it demand for raw materials.

Rubber rebound

Among farm commodities,

rubber

was a notable gainer, as might be expected, closing up 2.0% at 299.80 yen a kilogramme in Tokyo for April delivery.

Rubber, which is particularly sensitive to world economic hopes given its rank among industrial raw materials, has now recovered 9% from Friday's 14-month low.

But grains caught up, and at some points overtook, after the close in Tokyo trading, with Chicago

wheat

for December gaining 2.3% at one point, to hit $6.33 ¾ a bushel, before easing to $6.31 ½ a bushel as of 07:45 GMT, up 1.9% on the day.

November

soybeans

were 1.7% up at $12.31 ½ a bushel, with Chicago

corn

for December not far behind, adding 1.5% to $6.46 ¾ a bushel.

'Strengthening La Nina'

And, in Kuala Lumpur, January

palm oil

, of which Europe is a big importer, regained 3,000 ringgit a tonne for the first time in a month for a benchmark contract before easing back to 2,995 ringgit a tonne, up 1.5%.

Thoughts of production hiccups gained popularity too, with thoughts of a La Nina firming, and the poor growing weather it brings to Indonesia and Malaysia.

The Australian Bureau of Meteorology said that its weather models "suggest a further strengthening of the event is likely through until the mid-summer" in the southern hemisphere.

"Pacific Ocean temperatures have slowly cooled through the austral spring and are now at La Nina levels," although this one looks like being "considerably weaker than the strong 2010-11 event".

Rival vegetable oil

soyoil

added 1.9% to 51.85 cents a pound in Chicago for December delivery.

South America vs US

But can crops hold on to their gains?

Corn and especially soybeans face pressure from a South American sowing season which has got off to a good start, with Brazilian sowings of the oilseed reported 25% completed as opposed to 9% a year ago.

"Argentine soybean planting is just getting under way but rains over the past week have improved conditions," Kim Rugel at Benson Quinn Commodities said.

"This early start to soybean planting especially in Brazil could lead to earlier availability of new crop supplies, which many in the trade see crimping US export demand earlier than last year," potentially even from late January, a month earlier than in 2011.

"With US soybean export already off to a slow start on increased fall competition from South America, any early beans out of Brazil would shorten US's only window of opportunity to increase sales to China."

Some analysts are already talking of US soybean stocks of225m bushels at the close of 2011-12, compared with a current official estimate of 160m bushels.

"Hence the pressure that has been hanging over the soybean market despite lack of [US] producer selling and disappointing late-harvest yields," Rugel said.

'Someone was liquidating'

For corn, the purchase by Japan of crop from Ukraine, which has seen a jump in production to a record 20m-tonnes plus this year, is also preoccupying Chicago investors, potentially showing the way to a significant increase in competition in export markets.

Wheat saw an another upgrade to estimates for the Australian crop, this time by National Australia Bank, although at 25.1m tonnes, the new figure remains well below that of some other forecasters, and more than 1m tonnes below the official guess.

And then there are the pains at MF Global to deal with, following it downgrade and halving in its share price, woes which are speculated to be causing the liquidation of some of its commodity positions.

Mike Mawdsley at Market 1 clocked the "rumours that a global firm was liquidating long positions.

"Not sure just what the truth is, but someone was liquidating on the opening" to the last live session in Chicago.

Data later

Later, the market has weekly US export sales data to negotiate too, with corn's expected to come in at best half the previous week's China-boosted 1.85m tonnes, and potentially as low as 650,000 tonnes.

Wheat's are expected at 300,000-500,000 tonnes, in line with the previous week's 399,000 tonnes, with soybeans forecast to improve on the 595,000 tonnes last time, to reach 650,000-950,000 tonnes.

By Agrimoney.com

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