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Morning markets: late harvest supports crop prices

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Weakness in the dollar, prompted by a report that it might be ditched as the currency for oil trading, added to concerns for the lateness of US crops helped commodities off to a better start.

The dollar fell back, losing 0.5% to $1.4722 against the euro, after The Independent reported that Arab oil producers were in talks to ditch the use of the greenback in oil trading.

With the US seen as unlikely to raise interest rates soon, the currency is viewed as likely to suffer further losses, reducing the value of assets, including most major commodities, denominated in it.

China, which holds a huge hoard of US government bonds, earlier this year raised the prospect of the dollar losing its status as the world's reserve currency.

Slow harvest

However, what a weaker dollar does mean is that US exports become more competitive, a help for Chicago grains.

Crops were further boosted by data late on Monday showing America's harvest behind averages and expectations.

Growers had 15% of the soybean crop in the bin, less than half the proportion at the same stage last year, and less than the figure of at least 20% that traders had expected.

For corn, the harvest had reached 10% of the crop, compared with 25% a year ago and at the bottom end of the range of investors' predictions.

'Frost and freeze conditions'

This renders the crop more vulnerable to frost, which forecasters continue to believe is on the way.

Meteorlogix's latest forecast, this for eastern and western US corn areas, predicts "frost and freeze conditions likely developing early Saturday through western and north western areas".

It added: "A turn to cool and unsettled weather is unfavourable for the maturing crop and early harvest. A hard freeze is very possible across at least western and northern areas late this week or weekend."

Corn for December added 4.25 cents to $3.45 ¾ a bushel in Chicago, with November soybeans up 3.5 cents at $8.88 ½ a bushel.

December wheat added 3.25 cents to $4.46 a bushel.

Winter coming

In Kuala Lumpur, palm oil was less blessed, losing ground as traders mulled an unfavourable state of market dynamics.

Malaysian production is expected to show seasonal improvement at the same time as winter, notably in China, robs palm of some of its demand. The oil solidifies more easily than other vegetable oils at low temperatures, making it less useful in, for instance, biofuels in many countries.

In the near-term, exports are deemed likely to have been sapped by the sidelining of demand from China, which is celebrating an annual holiday.

Benchmark December palm oil closed the morning session on the Bursa Malaysia Derivative Exchange down 19 ringgit at 2,023 ringgit a tonne, in strong volumes.


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