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Morning markets: palm oil drops to seven-week low

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Palm oil slipped to a seven-week low in Kuala Lumpur, while Chicago soybeans dropped to their lowest since March, as the prospect of bumper US crops continued to undermine the market.

External markets did not offer much support. Oil slipped 1.5% to $68.24 a barrel for New York light crude for October, with profit-taking blamed for much of the decline.

That is bad news for crops used in making competitors to oil, such as corn-based ethanol.

The dollar did not help any commodities denominated in it by recovering ground against major currencies.

Benign weather

But the main reason for the decline was viewed as the huge US corn and soybean yields outlined in Friday's global crops supply and demand report from Washington, coupled with little prospect of a weather hiccup to make them look unrealistic.

For the US eastern and western regions, Meteorlogix forecast "generally favourable conditions for filling corn. Warmer temperatures continue to improve crop development".

For soybeans, the forecast was for "generally favourable conditions for pod setting and filling soybeans through the Midwest although more rainfall would benefit in some areas.

"Warmer weather benefits crop development. "

No sign, at any rate, of the frost threat that crop bulls are looking for. Indeed, the talk among traders is more of how much further the USDA will need to raise its yield figures.

Prices slip

In Chicago, soybeans for November turned back below $9 a bushel, standing 5.5 cents lower at $8.97 ½ a bushel at 06:30 GMT. Earlier, the lot hit $8.93 a bushel, the lowest for a nearest-but-one contract since March.

Trading in the near-term September contract has effectively closed down, ahead of it disappearing from the boards later on Monday.

Corn for December was 3.25 cents lower at $3.16 ½ a bushel, staying a signified distance above a 2009 low set last week.

Wheat maintained a less comfortable 2% cushion over two-year lows, standing 6 cents lower at $4.61 ¼ a bushel for December delivery.

Spillover to palm

In Kuala Lumpur, palm oil dropped 2.6% to 2,090 ringgit at one point, a level not seen since late July, depressed by the prospect of a huge quantity of US soybeans, and therefore soyoil, a rival to palm in many uses.

The benchmark November contract recovered some ground to close the morning session on the Bursa Malaysia Derivative Exchange down 42 ringgit at 2,103 ringgit a tonne.

Traders were putting hopes of a recovery on Malaysian export data for the first 15 days of September due on Tuesday.


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