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Morning markets: market optimism buoys crops

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Food commodities overcame weakness in Asian trading hours on Tuesday to report gains by the time European dealers got to the office, helped by some recovery in broader investor sentiment.

Stocks continued their revival. Tokyo's Nikkei share index followed Western markets higher, closing up 2.3% to break a nine-day losing streak.

Oil rebounded too. New York light crude for August stood $0.65 higher at $60.34 a barrel at 06:30 GMT.

Such optimism was credited to improved hopes for bank earnings due among the next batch of results during the US quarterly reporting season.

'Still nervous'

Nonetheless, many observers remained cautious – for commodities, at least.

"Investors are still nervous about going into the commodities markets in a big way," Ben Westmore, a commodities analyst at the National Bank of Australia, told Reuters, the news agency.

"Market players are still trying to reassess how long this recovery is going to take and it will probably need a good week of gains on the stock markets before their appetite for commodities investment increases."

Export hopes

Some investors, however, appear to have jumped Mr Westmore's gun. Benchmark September palm oil closed the morning session on the Bursa Malaysia Derivatives Exchange up 2.6% at 2,042 ringgit a tonne.

That was not all down to traders covering short positions after palm oil on Monday closed at its lowest since the end of March.

"I believe the market got the potential to go up because of good demand," a trader said.

"We should see exports growth at around 30% this month."

Cargo surveyors will on Wednesday reveal Malaysian export estimates for the first 15 days of July.

Chinese rain

Stronger oil prices also did their bit. (As energy gets more expensive, the economic case for biofuels gets easier to make.)

Indeed, that traders said that was one reason Chicago crops were a touch firmer too.

Soybeans, whose oil is a biofuel feedstock, added 1.75 cents to $10.20 a bushel for September delivery, if remaining uncomfortably close to their lowest levels since late April.

Reports of torrential rain in soybean-growing areas of China, a major bean importer, also helped.

September wheat, meanwhile, clung on to positive territory, up 0.25 cents at $5.43 a bushel, keeping hold of the 24 cents gained during Monday's star performance.

'Cash demand high'

Still, corn, a bigger bioethanol feedstock, was the best performer on Tuesday (in percentage terms, that is), up 1.25 cents to $3.34 a bushel, helped by firm demand.

"Cash demand in the US is pretty high for corn which is providing support to the futures," Brett Cooper, a trader with MF Global Australia, said.

By Mike Verdin

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