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Morning markets: grain futures choke on US debt wrangle

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If one debt problem – the eurozone's - was resolved, for now, another – America's - remained very much alive.

US lawmakers are still squabbling over a deal to raise the US debt ceiling, with apparently little progress over the weekend on a resolution.

That led to Monday looking very much "risk-off" in its aspect, with a disaster in China – a rail crash that killed at least 43 people – only adding to the gloom.

Shanghai shares plunged 2.8% in late deals, with Tokyo's already having closed down 0.8%, while, on commodities markets, both




fell too. West Texas Intermediate crude dipped 1.0% back below $99 a barrel.

'Pretty strong cold front'

That only made things worse for farm commodities, many of which are used in making biofuels. They fell even as far as Kuala Lumpur, where

palm oil

, a biodiesel source, went back to the defensive tumbling 1.5% to 3,092 ringgit a tonne as of 07:05 GMT (08:05 UK time).

Data from cargo surveyor Intertek Testing Services showing Malaysia's palm oil exports up 2.3% this month, implying a slowdown over the past week, did little to help.

In Chicago,


tumbled 2.0% to $6.84 a bushel for December, and by 2.0% to $6.76 a bushel for September, with forecasts for cooler weather for heat-stressed US crops.

Storms over the weekend that moved into states such as Illinois, Indiana and Ohio were "heavier larger than what the model data was forecasting last Friday", said.

"There is heat in the forecast, especially over the eastern Corn Belt and the lower portions of the western Corn Belt at the end of this week. But there is there is also a pretty strong cold front which arrives July 29-30 with potential for more significant rainfall."

Further danger ahead?

OK, that may not be the end of the heat-stress threat, with the forecast for days around August 4-8 showing a new "heat dome", currently centred below the main corn-growing states, but which "will have to be watched", the weather service said.

"It will not take much of a shift in the model data or the atmosphere to move the heat dome back into the Upper Plains and the Midwest during the month of August."

But it was too slim a hope for bulls to pin their flag on. And, with corn lower,


faded too, if not as fast and its fellow grain, so managing to rebuild a bit more of its usual premium.

Chicago's September contract dipped 1.4% to $6.82 ¾ a bushel. High-protein wheats this time performed better, or less badly, with Kansas hard red winter wheat for September losing 0.9% to $7.72 ¾ a bushel while Minneapolis hard red spring wheat shed 0.9% to $8.30 ¾ a bushel.

New best friend

And even


fell, after being confirmed by weekly regulatory data late on Friday as speculators' new best friend, or up-and-coming one anyway, with a sharp rise in their net long exposure.

"Large funds nearly doubled their long position to 78,011 contracts, their largest long in over three months," Kim Rugel at Benson Quinn Commodities noted.

Australia & New Zealand Bank said: "The soybean complex saw large speculative inflows. Speculative interest in the soybean complex leapt higher on the back of increased spreading and outright longs in soybeans and



Nonetheless, the best-traded November lot lost admirers on Monday, shedding 1.1% to $13.73 ½ a bushel, while soyoil for August dipped 1.2% to 55.85 cents a pound.

Data later

Mr Rugel added: "If weather situation were to dramatically improve, the market will be prone to mass long liquidation, but trade may be hesitant to sell till more is known about mid-August outlook."

Also crucial, after the market closes, will be data showing just how much damage the US heatwave has already done, following the surprise three-point dip in the "good" and "excellent" rating last week.


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