August 4, 2011

Corn drops on US economy slowdown concerns

Corn fell from a seven-week high, along with soy and wheat, over concerns about a slowdown of the US economy and lowered grain demand from decreased spending by US consumers and companies.

Service industries expanded in July at the slowest pace since February 2010, the Institute for Supply Management said today. Pacific Investment Management Co. and BlackRock Inc., which oversee a combined US$5 trillion, said the US economy is stalling.

"More economists are talking about a slowdown, and that may have a negative impact on demand," Jim Gerlach, president of A/C Trading Inc. in Fowler, Indiana, said in a phone interview to Bloomberg. "Investor worries about a return of their capital, rather than a return on their capital, is at the forefront, with 'risk-off' trading dominating markets."

Corn has rallied 76% in the past year on expectations of increased demand for ethanol and animal feed.

Corn futures for December delivery fell US$0.0275, or 0.4%, to close at US$7.13 a bushel on the Chicago Board of Trade. Earlier, the price touched US$7.185, the highest for a most-active contract since June 9.

Soy futures for November delivery declined US$0.0675, or 0.5%, to US$13.73 a bushel on the CBOT, the first drop in three sessions. The oilseed has climbed 35% in the past year.

Wheat futures for December delivery fell US$0.0875, or 1.2%, to US$7.50 a bushel in Chicago. The most-active contract has gained 10% in the past 12 months.

Corn is the biggest US crop, valued at US$66.7 billion in 2010, followed by soy at US$38.9 billion, according to government figures. Wheat is the fourth-largest, behind hay, at US$13 billion.