October 19, 2010

CBOT crops suffer sharp decline

CBOT's agricultural products saw a sharp decline on Monday (Oct 18), as the dollar began to gain strength in the early session and crop harvest is accelerating.

The most active corn contract for December delivery slid US$0.058, or 1%, to US$5.572 per bushel. December wheat slumped US$0.145, or 2%, to US$6.69 per bushel. November soy dropped US$0.01, or 0.04%, to US$11.84 per bushel.

The early strength in the dollar may help contribute to the corn's decline, although the dollar later eased. Farmers' increased corn selling and expectations of continued rapid harvest progress also triggered moderate fund selling in corn.

The Dollar Index advanced by 0.8% in the morning, after it touched 76.144 on October 15, the lowest level since December 11. A stronger dollar would make the agricultural products more expensive on the international market and thus, erode its appeal.

However, a market watcher noted that it's not a sign that the rally in corn is over, but it has encouraged some profit-taking on the risk trade that has benefited commodities.

Wheat futures suffered the largest decline for the latest two weeks on expectation that demand for the grain used in livestock feed will shrink as corn prices slump. Moreover, this week's export inspections for wheat arrived at 20.79 million bushels, falling from 32.9 million bushels in the prior week.

Wheat prices have jumped 44% since the end of June after drought in Russia and Eastern Europe reduced output. Soy also dropped on expectation that the US would complete 80%-85 % of its soy harvest on the Crop Progress report scheduled to be released later.