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Morning markets: eurozone hopes help crops to strong start

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European leaders seem to have got nearer than investors had expected to sorting out a plan to tackle the region's sovereign debt crisis, to judge by markets' start to the week.

Shares

soared. Tokyo's Nikkei index added 1.9%, Sydney shares gained 2.7% and Seoul stocks 3.3%.

The

dollar

eased too, a sign of growing economic confidence, and making dollar-denominated commodities more appealing to buyers in other currencies.

Brent

crude

added some 1%, to return above $110 a barrel, while

copper

soared some 3% in London (and 6% in Shanghai).

The rises were attributed to a weekend meeting of European Union leaders which saw France and Germany iron out some of their differences about how to tackle the debt problems (united in part by Italian recalcitrance to cut debt) although final agreement is not expected until later in the week.

'Wall of worry'

In agricultural commodities, there were widespread gains too – notably in

rubber

, which soared 4.6% to 295.20 yen a kilogramme in Tokyo for March delivery, having been particularly badly affected by market jitters last week in the run up to the eurozone meeting.

Besides, the International Rubber Consortium, comprising leading exporters Indonesia, Malaysia and Thailand, continues to threaten action to support prices, including a recommendation to farmers to slow sales.

In the US,

rice

futures were particularly strong, boosted by concerns for shipment from flooded Thailand, the top exporter, besides the general market buoyancy.

About 12.5% of rice land in Thailand has been damaged by flooding, alongwith 12% in Cambodia, 7.5% in Laos and 6% in the Philippines, a top importer, according to the United Nations.

"Going forth, we expect rice prices to propel higher, climbing a wall of worry underpinned by strong physical demand, especially in Asia where the grain is a food staple," Lynette Tan at Phillip Futures, in Singapore, said.

Chicago rough rice for November stood 3.0% higher at $16.90 a hundredweight at 07:30 GMT (08:30 UK time).

'Not sure what was so bearish'

However, other Chicago crops weren't too far behind - even

soybeans

, the extent of whose weakness last week, attributed largely to harvest pressure and disappointment over Chinese imports, surprised many observers

"I am not sure what news was so bearish for soybeans, or if option expiration [on Friday] affected soybeans," Mike Mawdsley said.

Whatever, Chicago's November lot managed to add 1.6% to $12.32 a bushel, easily breaching its 20-day moving average at $12.16 ½ a bushel.

Not that the US harvest hasn't been continuing apace, with a weekly US Department of Agriculture report to be released after the close of trading expected to show harvest advancing to 80-85% finished, from 69% a week before.

'Attractive target'

Corn

data is expected to reveal 65-75% of the harvest done, up from 47% a week before, with the pressure from extra supplies weighing on the grain a bit, limiting gains in the December contract to 1.3%, taking it to $6.57 ¾ a bushel.

Still, there was some positive demand news, with cattle data released after the close on Friday showing US numbers on feedlots rising 5.0% year on year as of the start of the month, a bigger rise than markets had expected and meaning extra mouths to feed with grain.

Technically, "the 50% retracement from the October low to the August high at $6.75 a bushel is still an attractive target for the bulls. A 62% Fibonacci level of $7.00 is also being considered by some in the trade," Jon Michalscheck at Benson Quinn Commodities.

There still seemed to be no further news on the potentially 10-20 cargoes of

wheat

that China is believed to have bought from Australia, and whether this was of feed or milling quality, nor a consensus of what this might mean for corn.

'Water stress'

Feed or milling, the rumours continued to buoy wheat, which added 1.8% to $6.43 ¼ a bushel in Chicago for December delivery.

Furthermore, "dry weather still remains an issue across parts of the US and Ukraine", Luke Mathews pointed out.

Indeed, winter wheat areas in neither country received much in the way of rain over the weekend – nor indeed in Europe, where dry weather has become an issue too, although heavy rains early this week are expected to alleviate problems.

"The weather is a source of concern with dry conditions in France and in Ukraine which provokes emergence problems on winter plantings," consultancy Agritel said.

"In Ukraine, 1.5m hectares are thought to suffer from water stress, and concern is great as winter conditions are very extreme in this country."

'Probable harvest delays'

In Australia, where harvest is kicking in, too much rain may be a problem.

"Heavy rain is expected across the Western Australia wheat belt over the next few days, causing probable harvest delays in the northern regions," Mr Mathews said.

Still, Rabobank lifted to 25.7m tonnes, from 24m tonnes, its forecast for the harvest, citing the beneficial impact of pre-harvest rains.

As a footnote, investors might also like to know that Egypt, the top wheat importer, over the weekend added Ukraine back on its roster of approved suppliers.

By Agrimoney.com

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