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Morning markets: iPad factor spurs markets - grains included

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What has the iPad2 got to do with the price of

corn

?

Well, the tablet computer, launched in March, sold like hotcakes to drive a 125% jump in profits at its manufacturer, Apple.

And that further improved sentiment on financial markets helped by decent statements from the likes of IBM, besides firm US housing starts data, on Tuesday. Whatever the debt problems facing the macro-economic situation, corporate profits appear, for now, to be holding up nicely.

Investment sentiment for risk was evident in a 1.2% jump in Tokyo's Nikkei share index, a 0.2% slip in the

dollar

and a jump of 0.9% in the price of West Texas Intermediate

crude

.

And that meant the default direction for crop prices was up, even before taking the weather forecast into account. And this, depending on which models you believe, continues to foresee uncomfortable hot Midwest temperatures for pollinating corn, with a break around this weekend.

Model concerns

So corn prices headed higher, although rises were tempered by the doubts which cost the grain most of gains achieved early in the last session.

"There is enough concern about the validity of the weather models to keep most of the market on the defensive," Brian Henry at Benson Quinn Commodities said.

"Funds have been adding to the long position, but near these prices they are going to have to have confidence that the market is going to be able to continue the upside momentum."

Furthermore, on the demand side, there has been a notable tail-off in talk of big orders, which accompanied the lower prices hit early in the month.

Corn for December, the best-traded contract, added 1.5% to $6.97 ¾ a bushel as of 07:50 GMT (08:50 UK time), with the September lot up 1.5% at $7.08 ¼ a bushel.

Russian reminder

That was enough to maintain the September contract's unusual premium over its grain peer

wheat

, but not by much.

And only with a bit of help from the low prices being offered by Black Sea exporters in keeping some check on values elsewhere.

"Russian wheat prices remind everyone that competition is real on the international market," Agritel, the Paris-based consultancy, said.

"Moreover, they keep retreating. Yesterday they were posted at $235 a tonne while French and US offers exceed $280 a tonne."

Chicago's September lot added 1.9% to $7.06 ¾ a bushel.

Not the critical time

Soybeans

also gained, if maintaining its knack for lower volatility. It also failed to return to the $14-a-bushel levels reached in the last session.

The August contract added 0.8% to $13.90 a bushel, while the November lot gained 0.8% to $13.93 ½ a bushel.

"Soybean crops are still a few weeks away from their critical yield development phase, and with midday forecasts adding some rain in longer range outlooks, investors may be nervous of sustaining long positions at historically high prices," Ker Chung Yang at Phillip Futures said.

'Cratering prices'

Still, at least this time the oilseed was beating

cotton

, which maintained its habit of high volatility, closing up or down the exchange limit some 60 times in New York over the past year.

The last time was last night, when New York's December contract closed up the daily limit, with synthetic trading suggesting a further 1 cent rise to come.

That the lot duly did early on Wednesday, only to fall back to 100.01 cents a pound, down 0.8% on the day, amid plenty of talk of cancelled orders and reduced demand.

"While cratering prices may sound like a good thing for demand through the cotton supply chain, they just might not be," Australia & New Zealand Bank said.

"A lot of pricing was done high through the first quarter," when prices soared above 200 cents, "and a lot of that cotton is still on people's books. So the clear incentive on cotton buys that are now 50% out of the money is to walk away.

"For every bale of 200-cent cotton someone is long and walks away from, someone else is left holding stocks they don't want/need…"

Index signal

A note of caution was also struck by prices on China's Zhengzhou exchange, where cotton for January fell 1.3% to 21,550 remninbi a tonne.

However, sticking with a broader view, investors might also keep an eye on the CRB commodities index, which formed a gap in its chart on Tuesday in adding 2.7 points to 346.54 points, getting nearer the key level of its 10-day moving average, at 350.20 points.

A close above that might well bring fresh interest in raw materials from momentum traders.

By Agrimoney.com

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