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Morning markets: soaring oil lifts crop prices

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Some recoupling between oil and food commodities crept onto the agenda on Tuesday, although trading remained muted ahead of key US agri reports due later.

Oil set course for its best quarter since 1990, helped in part by attacks on Shell facilities in Nigeria – Africa's biggest crude-producing state – but also by huge orders from funds.

Around 02:00 GMT, trading volumes in both Brent and New York crude soared to more than 10 times the norm for Asian trading hours, helping prices up $1.50 a barrel in less than half an hour, according to Reuters, the news agency.

They clung on to the gains, with New York crude for August standing $1.42 higher at $72.91 at 06:00 GMT, and Brent up $1.61 at $72.60 a barrel.

'Underlying support'

Given the observation that higher crude prices should be good for the prices of crops, many of which are used for biofuels, food commodities should have been helped higher.

And this time, they were. While the correlation between oil and wheat and corn, both ethanol feedstocks, has appeared weak for most of the month, on Tuesday some link may have reappeared.

"Crude oil is surging ahead which is providing some underlying support to the grain markets," one commodities analyst in Australia said.

However, trade remained somewhat muted with the prospect of important US Department of Agriculture data on American crop plantings, and stocks, due later.

Chicago wheat for July was 8 cents higher at $5.36 ½ a bushel, with corn adding 1.5 cents to $3.78 ½ a bushel.

'Nothing great'

July soybeans, for once, were not topping the pile in percentage gains, adding 9.75 cents to $12.24 ¾ a bushel.

The USDA reports are expected to show an increase in soybean acres, but a fall in stocks to 585m bushels, down from 676m a year before.

Palm oil was even more sluggish, despite data from Intertek Testing Service, the cargo surveyor, showing exports of Malaysian palm oil products up 1.6% in June to 1.23m tonnes.

"The number is within expectations," a trader said.

"There's nothing great about it, that's why the market came off a little bit."

Benchmark September palm oil closed the morning session on the Bursa Malaysia Derivatives Exchange up 1 ringgit at 2,263 ringgit a tonne, below an intraday high of 2,294 ringgit a tonne.

By Mike Verdin

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