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December 8, 2008

 

US corn falls below US$3 for the first time in two years

 

 

US corn prices fell to their lowest level since 2006 Friday (December 5) at US$3 per bushel mark as worsening economic conditions eroded demand and kept commodity investors on the sidelines, traders said.

 

The economic slump also hit soy prices, which slipped under US$8 a bushel for the first time since May 2007.

 

The US Labour Department data showed that employers axed 533,000 jobs in November, the most in 34 years. The unemployment rate hit 6.7 percent, the highest since 1993.

 

Shawn McCambridge, analyst with Prudential Bache Commodities said the decline was due to disappointing economic reports which pressure commodity markets on concerns that demand could continue to slow if recession deepens.

 

Chicago Board of Trade corn futures for December delivery closed 24-3/4 cents a bushel lower, down 7.8 percent, at US$2.93-1/2 - the first time the spot price has dipped below US$3 since October 2006.

 

January soy ended 27-1/2 cents weaker, or 3.4 percent, at US$7.83-1/2 a bushel.

 

CBOT December wheat reached a 20-month low, ending 10 cents, or 2 percent, lower at US$4.57-3/4.

 

Don Roose, analyst with US Commodities in West Des Moines, Iowa said grain markets are deflating and buyers are operating more on a "hand-to-mouth basis" with corn falling 47 percent from yearago. Another sign of the bearish tone was the declining petroleum market, with crude oil closing more than US$2 a barrel lower at US$40.81.

 

Kim Do-young, a trader at KB Futures, said following the Asian trading session, its time to snap up on grains as due to weaker demand

 

In Europe, milling wheat futures fell to their lowest level in more than two years at the open as deepening recession fears increased worries of a fall in demand for grain. They recovered slightly in late trade.

 

The benchmark January wheat contract closed down 1.25 euros or 1 percent at 123.50 euros a tonne, after hitting 122.25 euros, a level not seen since the summer of 2006.

 

Traders said prices were approaching the intervention price, the minimum price at which the European Union must buy farmers' grains.

 

Analysing the situation, a trader said wheat has to become more competitive to get stocks out and the only chance it has to make it to feed makers is to fall closer to intervention levels.

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