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Morning markets: palm leads soft start for crops

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Palm oil took its turn under the cosh as profit-taking set in both in Kuala Lumpur and, where possible, in Chicago, as crops looked set for a muted end to the week.

Signs from external markets remained fair, amid rising hopes for global economic revival, with Tokyo's Nikkei share index closing up 0.7%. That said, the weight of rights issues depressed Shanghai shares, which slipped 2.5%.

September oil ticked $0.33 higher to $70.87 a barrel in New York at 05:45 GMT.

"There is mounting evidence that the recession is over and that a phase of rapid growth in OECD industrial metals and energy demand is imminent," a Barclays Capital research note said.

Friday feeling

Agricultural commodities, however, still seemed reluctant to get the message, with palm oil shedding 3.3% in the morning session on Bursa Malaysia's Derivatives Exchange despite its use in biofuels.

While fundamentals appear good, with Malaysian production flagging and demand strong heading into the Asian festival season, traders said that, with the weekend ahead, investors were taking the opportunity to book gains.

The benchmark October contract, even after slipping 84 ringgit to 2,431 ringgit a tonne on Friday, still stood 22% above a mid-July low.

Wild beans

Soybeans, the source of soyoil and so palm's vegetable oil rival in Chicago, was also a little soft, although not as bad as the 4.0% slump to $11.40 a bushel in August beans might make it appear.

The contract, which expires imminently, is now little traded, meaning individual trades can have a relatively large impact on prices.

The November, new crop contract, a better gauge of sentiment, stood 5.5 cents lower at $10.13 ¼ a bushel, recovering from a drop to $10.01 earlier.

'Warm temperatures'

Profit taking was offered as one explanation for the drop. Weather was another, with conditions looking good during the vulnerable pod-setting stage.

DTN Meteorlogix said in a crop forecast: "Warm temperatures and adequate soil moisture will favour the pod setting and filling crop.

"Crop development remains behind normal in most areas although the warmer temperatures will increase crop development."

It was more difficult, for long investors at least, to take profits in wheat, with it trading so near its 2009 low. Which may be one reason why the benchmark September contract stood only 0.5 cents lower at $4.81 ½ a bushel.

Indeed, the year low of $4.76 ¼ a bushel set on Wednesday appears to be providing something of a floor, with the contract failing for two days now to revisit it. Friday's low, thus far, was $4.79 a bushel.

September corn was 0.5 cents lower at $3.24 a bushel.


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