June 23, 2011

CBOT corn, wheat slides as supply fears ease

CBOT corn futures tumbled to the one-day limit on losses on Wednesday (Jun 22) and wheat futures fell more than 4% as concerns over low supplies eased.

CBOT corn futures tumbled to the one-day limit on losses Wednesday and wheat futures fell more than 4% as concerns over low supplies eased.

Both grains have sold off sharply, with corn futures falling to a six-week low after setting all-time highs earlier this month. The pullback in wheat futures was even sharper, touching an 11-month low on Wednesday at the Chicago Board of Trade. CBOT December corn dropped 30 cents, or 4.4%, to US$6.50 1/4 a bushel. The daily limit expands to 45 cents on Thursday (Jun 23).

Funds sold an estimated 30,000 corn contracts, according to floor traders. The big feature in the market was widespread speculation that a large macro fund was liquidating positions in grain futures, said Dan Basse, president of AgResource Co., a Chicago-based agricultural advisory service.

Corn prices also were driven lower by slowing demand and favorable weather for the US crop that is developing. Forecasts for warmer temperatures in the Midwest encouraged projections that output may exceed previous outlooks. Corn futures dropped to their lowest levels since early May, effectively extracting the premium fueled by spring planting problems.

The slide was overdone, as inventories of corn remain tight at a 15-year low, said Jason Britt, president of Central States Commodities, a brokerage in Kansas City, Mo.

Wheat slumped on a combination of new supplies from the US harvest that is under way and increased supplies in the export market as output rises in the Black Sea region, analysts said.

European wheat futures sank as well. Prices in Paris were weaker before day trading began in Chicago and dropped as much as 7%.

Commodity funds were unloading positions, including an estimated 8,000 wheat contracts at CBOT. Most-active CBOT September wheat dropped 32 1/4 cents or 4.6% to US$6.73 1/4; KCBT September lost 32 3/4 cents or 4% to US$7.88 3/4; MGE September dropped 33 3/4 cents or 3.8% to US$8.51 1/2.

US soy futures stumbled, ending at a five-week low on spillover weakness from grain futures. The market was consumed in broad-based selling in grain futures, falling on a domino effect of tumbling wheat and corn futures, said analysts. CBOT November soy ended down 1.3% at US$13.32 1/2 a bushel.

CBOT July soymeal dropped 1.3% to US$347.10 a short tonne and December soyoil fell 0.8% to 57.50 cents a pound.