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Morning markets: soybeans maintain upward march

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Wheat slipped back from a five-month high in Chicago, leaving vegetable oil crops to take the laurels in early deals on Wednesday – and in particular Kuala Lumpur palm oil, which jumped 2.4%.

Profit-taking was more of a feature of early trading in Chicago, following Tuesday's close at their highest since August 4. (Kansas and Minneapolis wheats stopped just short of similar feats).

The difficulty for investors is in deciding exactly how long legs the rally has got, given that it is based on factors other than fundamentals, which remain pretty weak, bar some concerns over plantings for next year's crop.

Dollar independence

Buying by funds and speculators has been behind the 15% increase in wheat prices in two sessions, with even the dollar playing a back seat role.

"Fund buying seems less tied to the direction of the US dollar recently," Kevin Kjorsvik at Benson Quinn Commodities said.

"Several moves higher over the past three weeks have come on days when the US dollar index was trading higher. It appears that institutional money is becoming less predictable."

For what it's worth, the dollar, which usually plays a big factor in US crop prices was steady, as dealers awaited US inflation data and a Bank of England report which will give more detail of its thinking in extending so-called quantitative easing earlier this month.

Funds to return?

Some analysts pointed to wheat having broken above its 200-day moving average as a technical point to cling on to.

Still, as Benson Quinn said, "it remains to be seen if the funds will be back".

December wheat stood 6.25 cents lower at $5.68 ½ a bushel at 07:50 GMT.

Corn, which has taken more of a back seat this week, as the delayed US harvest kicks into gear, reducing crop risk, eased 0.25 cents to $4.01 ¾ a bushel for December delivery.

Fundamental support

Soybeans, however, maintained some upward progress, looking to set another three-month closing high.

It has gained some support from fundamentals, with decent US crush statistics, Oil World revising down its forecast for Argentine production, and some talk of losses among crops which remain in the field.

Chicago's January contract added 0.5 cents to $10.30 a bushel.

Monsoon flooding

The strength of vegetable oil crops was reflected in Kuala Lumpur too, where palm oil crossed above 2,400 ringgit a tonne at one point for the first time since late August.

Besides the strength of Chicago soybeans, it has gained succour from talk of floods in Malaysia, which is in the grips of monsoon rains.

"The fundamentals are quite straightforward. Exports are quite good and we have a little setback in production. So the market is well supported," a trader told Reuters, the news agency.

The benchmark February contract stood 54 ringgit higher at 2,396 ringgit a tonne.


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