October 3, 2008

Corn prices drop on Senate approval of rescue plan in US

Corn futures slumped more than 6 percent to the lowest in nearly 10 months, as the US dollar rallied after the Senate approved a revised version of the US$700 billion rescue plan, pushing dollar-denominated corn prices lower.

Corn for December delivery dropped 6.2 percent, to end at US$4.54 a bushel on the CBOT, the lowest closing level since December 2007. Soy and wheat also moved lower.

Corn's losses followed broad declines in commodities. Gold futures slumped nearly 5 percent, and crude oil lost more than 3 percent to below US$95 a barrel. The Reuters/Jefferies CRB Index, benchmark gauging the prices of major commodities, tumbled 4.3 percent.

The Senate approved the revised plan on Wednesday night to stabilize the financial industry, just two days after the House of Representatives rejected the original package.

Currency analyst at Brown Brothers Harriman said that the passage of the US$700 billion financial rescue package in the Senate contributed to the firmer dollar tone.

The dollar rose against the euro, with the European currency standing at US$1.3827, down from US$1.4007 in late Wednesday trading. The dollar was also higher against the British pound.

A rising greenback tends to push down dollar denominated commodities prices.

Meanwhile the retreat in corn prices also resulted in lower soy and wheat prices.

Also on the CBOT, December wheat dropped 34 cents, or 5.1 percent, to US$6.36 a bushel and November soy fell 49 cents, 4.7 percent, to US$10.04 a bushel.