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Morning markets: palm leads food commodities lower

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A cocktail of negative stimuli from external markets helped food commodities off to a poor start to the weak, with palm oil slipping 3.4%.

Last week's higher-than-expected US unemployment figures continued to overhang financial markets, sending Tokyo shares down 1.4% and sending oil lower again.

New York crude for August stood 2.7% lower at $64.91 a barrel at $06:15 GMT. It has now lost 7.1% in three trading days.

Oil is typically an important steer for food commodities because of their use in making biofuels.

'Budget juggernaut'

That was true for Kuala Lumpur palm oil, which had the extra depressant of a potential Indian import tax to deal with, sending it to a three-month low.

Many traders fear that India will, in today's budget, slap a 20% duty on palm imports, crushing hopes of a rise in demand. This year's monsoon is expected to be a weak one, raising the prospect of weak domestic crops.

"Risk appetite has withered away for much of the vegetable oil complex and traders are looking out for the Indian budget juggernaut where there will certainly be some surprises for the markets," a trader told Reuters, the news agency.

"There [are] only day trades from refiners happening in the market. It's more or less quiet."

Benchmark September palm oil closed the morning session on Bursa Malaysia's Derivatives Exchange down 45 ringgit at 2,130 ringgit a tonne, having dropped earlier to 2,101 ringgit a tonne, its lowest since early April.

Resilient dollar

Chicago crops had a robust dollar to deal with, making them appear expensive to foreign buyers.

The greenback slipped below $1.40 against the euro on Monday as, with hopes for global economic recovery on the wane, investors returned to what has become seen as a safe-haven currency.

Again, it was the oilseed, soybeans, which was particularly weak, with the July contract down 16 cents at $12.27 cents a bushel and new-crop November beans doing even worse, off 21 cents at $9.85 a bushel.

Good growing weather in US soybean farming areas did not help.

Corn slips again

Corn was 3.75 cents down at $3.42 a bushel for July delivery, with last week's US report showing the biggest US plantings since 1946 continuing to pressure the crop.

Indeed, new crop contracts were worse off, with March 2010 slipping 8.25 cents to $3.62 ¾ a bushel.

Wheat did better, sliding 0.5 cents to $4.99 ¾ a bushel, with the December contract even making ground, up 0.5 cents at $5.55 ½ a bushel.

By Mike Verdin

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