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Morning markets: new dawn fades for crop prices

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A rally in food commodities in Asian trading petered out by the time it reached Europe, as fears for the global economic February continued to unnerve investors.

Food commodities notched up small gains early on Monday, recovering some of the ground lost last week, when corn dipped 5%, palm oil shed 8%, soybeans lost nearly 10%, and wheat shed 2%.

However, ripples of optimism struck again rocks of discontent at prospects for global recovery.

'Rally overdone'

Indeed, on external markets Tokyo's Nikkei share index finished down 2.6%, recording its ninth successive negative close, while oil, which lost 11% last week, slid further below $60 a barrel.

New York crude for August dropped 1.5% to $58.98 a barrel at 06:30 GMT

"Economic concerns are continuing to weigh on oil prices. The rally we saw last month was clearly overdone," Daniel Liu, an energy strategist at MF Global Singapore, told Reuters, the news agency.

"We believe oil prices will see a further correction to fall to around $55, before it bounces up when confidence on the global economy returns to the market."

Losing contracts

In Chicago, the August soybean contract slipped 4.25 cents to $10.40 ½ a bushel, having touched $10.54 ¾ a bushel earlier.

Concerns over America's low stocks have been eased by US expectations of a record soybean harvest this year, as confirmed in Friday's US Department of Agriculture crop supply and demand report.

Corn for September lost 5.5 cents to $3.22 ¾ a bushel, after troubling $3.30 a bushel earlier.

America's corn crop this year should be the second biggest ever, US data confirmed.

Head above water

However, wheat managed to hold on to some gains, up 2.5 cents to $5.21 ¼ a bushel for the September contract.

And, in Kuala Lumpur, September palm oil closed the morning session on Bursa Malaysia's Derivatives Exchange up 8 ringgit at 2,018 ringgit a tonne.

Data last week showed better market fundamentals, from a bull's point of view, than had been expected, with Malaysian exports strong and stocks growing only slowly.

Nonetheless, many traders fear the reprieve could be temporary as trade from rival palm oil giant Indonesia swells global inventories.

"China and India are in the market but they are just living on a hand-to-mouth basis because they know for sure stocks are higher everywhere," a trader said.

By Mike Verdin

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