Corn, Soybeans Drop as Dollar’s Rally Erodes Commodity Demand

Corn declined to the lowest price in four months and soybeans fell as the dollar’s climb reduced the appeal of commodities as an alternative investment.

The dollar rose to an eight-month high against the euro on bets that rising budget deficits in nations such as Greece, Portugal and Spain will hamper Europe’s growth. Global equities fell to the lowest level since September and crude oil tumbled to a seven-week low.

“People are nervous about the health of the world economy,” said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis. “The stock market is wobbly and crude oil is falling, and that reduces the flow of speculative money into commodities.”

Corn futures for March delivery fell 2.5 cents, or 0.7 percent, to $3.515 a bushel on the Chicago Board of Trade. Earlier, the most-active contract touched $3.475, the lowest price since Oct. 6. This week, the grain fell 1.4 percent, the fourth straight decline.

Soybean futures for March delivery fell 0.5 cent to $9.135 a bushel. Yesterday, the price touched $9, the lowest level since Oct. 6. The oilseed was down for the fifth straight week.

Demand for corn on the spot market has slowed on speculation that sales will increase from Brazil and Argentina, Schultz said. The nations are the biggest exporters behind the U.S.

Combined production in the South American countries will rise 3.8 percent to 66 million tons this year, the U.S. Department of Agriculture said on Jan. 12.

“The weather remains favorable for big crops,” Schultz said. “U.S. exports are likely to slow” as buyers will favor cheaper and higher-quality supplies from Brazil and Argentina, Schultz said.

Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, followed by soybeans are second at $27.4 billion, government data show.

By Jeff Wilson
Bloomberg