August 5, 2008
Corn and soy takes a drubbing while US wheat finds support
The US soy market dropped more than 2 percent on Monday (Aug 4, 2008) to its lowest level in more than two months as the Chinese government closed down factories near Beijing to cut down pollution.
The all-important Olympics games was seen to be paramount, with Beijing doing its utmost to ensure smog and haze do not tarnish the city's reputation as it hosts the world's most prestigious sporting event.
Beijing and neighbouring provinces have asked polluting industries to shut or reduce production as athletes raised concerns over air quality.
CBOT August delivery soy fell 2.14 percent, or 29 cents, to US$13.22-1/2 per bushel by 1030 GMT, the lowest level since May 30.
Meanwhile, in the US, August would be a critical month for soy, especially with regards to weather as the plants set pods that determine yield and production.
Meanwhile, US corn dropped more than 1 percent, extending losses as outlooks for favourable weather boosted prospects.
September delivery corn was down 0.53 percent, or 3 cents, at US$5.62 per bushel, after sliding 3.83 percent in US trade on Friday (Aug 1, 2008).
US corn is also at a critical development stage when hot and dry conditions can cut yields. The US crop normally pollinates in July, but this year's corn is developing about two weeks later than normal as spring rains delayed planting.
Grain prices were also pressured by the recent drop in oil prices because of increased output from the world's top exporter Saudi Arabia.
On Friday, corn also was pressured by inter-market spreading, with speculators selling corn and buying wheat. The exit of commodity funds from the corn market was also one reason for the drop in corn futures, according to CBOT floor traders.
The spread activity helped lift CBOT wheat futures on Friday, with September rising 10-1/4 cents, or 1.3 percent, to close at $7.94 a bushel.
Moreover, higher wheat demand from Asia and the middle east have provided support to prices last week, with Pakistan issuing a tender for 250,000 tonnes of wheat and USDA data showing stronger than expected US wheat sales of 726,400 tonnes, with significant volumes going to Iran and Egypt.
Meanwhile in the EU, wheat prices are rather stable due to the uncertainty on milling wheat supplies after heavy rain in Ukraine and humid weather both in Germany and northern France delayed harvest.