October 31, 2008


US grains rally halted in Europe


US soy and grains rose in Asian trading on Thursday, 30 October 2008 after a cut in interest rates by the Federation led the US dollar to its biggest one-day fall in 23 years and a rebound in equity markets.


But profit-taking in Europe took the limelight off earlier gains and pushed wheat and corn back into the red.


The Federal Reserve's 50 point cut rate helped ease investor concerns about the global economy but the move caused a slide in the dollar's value.


This helped CBOT grains and oilseeds contracts to rise in advance electronic trading in Asia. But profit-taking pressured CBOT wheat, corn and soy in the European session.


Paris wheat futures were slightly stronger, with the Euronext November wheat contract up EUR 0.50 at EUR 146.00 at 1300 GMT.


An European trader said a currency story is present today, with the dollar sliding, signs of general strength in the dollar-denominated agricultural commodities can be seen. European wheat futures are stronger in sympathy although it should not be the case as the currency shift is not in trader's favour.


However, European traders said that selling pressure kept a lid on the rise in Europe.

Many people still have the idea that any rally will be short-lived and there remains a lot of selling interest. This is a repeated cycle when Europe prices rise.


European traders also stressed the success of Russian wheat in Egypt's tender on Wednesday, 29 October 2008 coupled with the extremely aggressive price. Jordan bought Black Sea wheat in its Wednesday, 29 October 2008 tender.


The two tenders came as negative results for west European exports as they exhibit competition that is heating up in Russia.


CBOT December wheat fell 0.2 percent in Europe to US$5.59 - 3/4 per bushel after rising 3 percent in Asian trade and soaring 9 percent in the US on Wednesday, 29 October 2008.


CBOT corn for December delivery was down by 0.06 percent at US$4.20 - 1/2 per bushel after gaining 2.7 percent in the Asian session.


This meant corn was just holding onto a 7-plus percent rise the previous day when several contracts hit the daily limit of a 30 cent per bushel change in price.


Front-month corn, which has risen about 16 percent this week, is on its way to chalking its biggest weekly gain this year, outstripping a 12.8 percent gain in mid-June before it hit a record-high US$7.99-1/4 per bushel on June 27.


The rise has been purely exchange driven, said Luke Chandler, global grain commodity markets analyst at Rabobank in Sydney. Over the last couple of months, commodity prices have come off sharply as the US dollar rallied and correction was evident overnight.


Soy futures for November delivery were still just in the black in Europe, rising 0.2 percent to US$9.39-3/4 a bushel with profit-taking again taking the shine off a 2.3 percent rise in Asian trade which followed a 6.7 percent gain on Wednesday, 29 October 2008.

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