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Morning markets: short-covering helps crop prices

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Farm commodities bounced a little on Tuesday – but short covering rather than fundamental interest took the credit with benign weather still pointing to robust US crops.

In fact, most external stimuli pointed to lower crop prices.

The flight to so-called safe haven investments continued on fears that the global economic rebound may not as dramatic as some observers had hoped.

Tokyo stocks slumped 3.1% while the dollar stayed higher against most currencies. A stronger greenback is usually bad news for prices of dollar-denominated commodities, making them more expensive to foreign buyers.

Indeed, oil, that flagship commodity, added to yesterday's near-4% falls. New York crude for August stood $0.55 a barrel down at $66.95 a barrel at 05:30 GMT, 8.6% below its mid-June high.

'Short-covering session'

So traders did not read too much into some modest rises in the prices of Chicago crops, especially when weather appeared pretty near perfect for US farmers.

Those combining, winter wheat, towards the south of the US, are set for at least a week of fair weather.

Fields newly planted with corn, as in the Midwest, are to enjoy warm weather which, following weekend rains, should get seedlings off to a good start.

So rises of 2.25 cents to $3.87 ½ a bushel in the price of July corn, 5 cents to $11.57 a bushel in soybeans and 3.25 cents to $5.49 ½ a bushel in wheat were taken as signs of investors who have held short positions taking profits from recent falls.

"Beans and corn have been pretty heavily sold over the last couple of sessions so we've seeing a bit of a short-covering session, though it won't last that long as weather conditions are quite favourable," Doug Whitehead, a commodity strategist at Australia & New Zealand Banking Group told Reuters, the news agency.

'Market oversold'

In Kuala Lumpur, traders were more generous about a 2.5% rebound to 2.210 ringgit a tonne in palm oil, attributing some fundamental reasons to help the commodity rebound from 11-week lows.

A rumour of signs of a recovery in exports, from the falls noted by cargo surveyors in the first 20 days of June, also helped.

"The market was oversold, the fundamentals were not reflected," a trader with a foreign commodities brokerage said, adding that "there is talk that exports for the first 25 days of June will be an improvement."

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