July 8, 2011

CBOT corn, soy prices fall on China's interest rate increase

Corn and soy prices on the Chicago Board of Trade (CBOT) fell after China raised interest rates for the third time this year, renewing concern that slowing growth will curb demand for feed crops from the US, the world's largest exporter.

China, the world's biggest producer of pork and largest importer of soy, has raised borrowing costs to cool inflation that reached a three-year high.

"We are seeing a knee-jerk reaction to tightening monetary policy in China," said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana.

Stockpiles of soy at Chinese ports rose to almost seven million tonnes as processors slowed operations to curb losses, the Economic Observer reported Wednesday (Jul 6).

Corn futures for December delivery fell US$0.0325, or 0.5%, to US$6.0925 a bushel on the Chicago Board of Trade (CBOT). A close at that price would be the fourth decline in five sessions.

Soy futures for November delivery fell US$0.03, or 0.2%, to US$13.15 a bushel on CBOT, the first drop in three sessions.

Prices also fell after the US Department of Agriculture (USDA) said warmer, drier weather boosted domestic crop development, said Gerlach.

About 69% of the corn crop was in good or excellent condition as of July 3, compared with 68% a week earlier, the USDA said Wednesday (Jul 6). An estimated 66% of the soybean crop got the top ratings, up from 65% a week earlier.

Corn conditions in Iowa, the largest US grower, are 15 percentage points higher than a year earlier, while soy conditions were 17 percentage points higher, the USDA said.

Corn is the biggest US crop, valued at US$66.7 billion in 2010, followed by soy at US$38.9 billion, according to US government figures.