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Slide in US crop health buoys Chicago prices

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Concerns that US crops might not be doing quite as well as markets had expected helped Chicago's main grains make ground on Tuesday.

There was no such joy in Kuala Lumpur for palm oil, however, which dropped 1.7% to a fresh three-month low, even though the latest US crop progress report was not the only reason to get bullish on food commodities.

The oil price also steadied, pulling out of a four-day dive following worse-than-expected US unemployment data. Brent crude for August stood $0.15 higher at $64.20 a barrel at 06:15 GMT.

Oil often signals the way for crops, many of which – including palm oil - are used for making alternative fuels.

Short covering

Wheat led the rebound in Chicago, adding 4.75 cents to $4.95 ½ a bushel for July delivery, with forward contracts showing similar gains.

The US Department of Agriculture's weekly crop progress update showed that, while the winter wheat harvest was progressing well, there had been some deterioration in the spring wheat crop.

The percentage rated poor or very poor grew two percentage points to 8%, while the proportion rated good or excellent fell by four points to 72%.

"The crop report is giving some strength," Toby Hassall, an analyst with Commodity Warrants Australia, said.

"The market was looking for some improvement in crop conditions, we actually got a small deterioration.

"It is not a huge concern but it's possibly providing the market with some reason to take profits on short positions."

Corn revives

For corn, the deterioration was more modest, only a percentage point at both ends of the scale.

Still, many traders had been expecting better following the benign weather in growing districts which, coupled with the biggest plantings since 1946, has promised a bumper crop.

July corn added 2 cents to $3.45 ½ a bushel, a gain echoed by new crop contracts.

Soybeans, for which the deterioration in crop quality was put by the USDA at a couple of points at either end, added 2.75 cents to $12.02 ¾ for July, with forward contracts doing even better.

November beans, for instance, added 9.25 cents to $9.72 ¼ a bushel.

Production fears

In Kuala Lumpur, waning signs of a disruptive El Nino weather pattern setting in were blamed for a fall earlier to 2,092 ringgit a tonne in benchmark September palm oil, the lowest since early April.

The contract stood at 2,100 ringgit a tonne at lunchtime, down 29 ringgit on the day.

"Easing El Nino means production may have a chance of recovering very, very strongly," a trader told Reuters, the news agency.

While the chances of a poor Indian monsoon remain high – signalling weak harvests ahead - "the ports in India are still full" of old crop oilseeds, the trader added.

By Mike Verdin

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