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Morning markets: short-covering leads wheat higher

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Wheat continued to tick higher, looking for a third successive positive close in Chicago, as traders again appeared reluctant to try to renew the grain's bear run.

It wasn't plain sailing for US crops, with the dollar continuing a modest revival.

US home sales, unexpectedly, fell for the first time in four months in August, data on Thursday showed, hitting hopes for global economic recovery which, in turn, prompted something of a return by investors to the safety of the dollar. A stronger greenback makes US exports such as crops less competitive.

'Bearish fundamentals'

However, wheat continued to benefit from concerns among bears that maybe the crop had reached some kind of floor, after retreating by about one third from early-June highs.

As French analysis group Agritel put it: "Chicago wheat prices are supported by short-covering despite the bearish fundamentals."

The December contract stood 2.5 cents higher at $4.75 ½ a bushel at 06:15 GMT, leaving it 11% above the two-year low hit on September 11.

Freeze threat

This time, however, strong wheat could not help corn remain in positive territory, given the waning prospects of a frost to damage yields in major US growing areas.

Meterologix forecast temperatures "mostly above normal Sunday, near to below normal Monday, below normal Tuesday. There is no damaging cold in sight".

Chicago's December contract down 2 cents at $3.34 ½ a bushel.

Soybeans marked time, albeit at levels not far above five-month lows. The November contract remained at $9.19 ½ a bushel.

A potential frost has been less of a factor for soybeans, which are further ahead in development. However, the prospects of a huge South American crop being harvested in early 2010 have weighed heavily on sentiment.

Palm rebounds

Palm oil, soy's rival in the vegetable oil market, did modestly better in Kuala Lumpur, with traders considering that its decline may have gone far enough for now, given relative tightness in the market.

The benchmark December contract closed the morning session on the Bursa Malaysia Derivative Exchange up 21 ringgit at 2,136 ringgit a tonne.

Nonetheless, palm remains 14% below highs of a month ago.

By Agrimoney.com

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