Corn, Soybeans Drop as Rising Dollar, Falling Oil Cut Demand

Corn fell for a fourth straight session and soybeans dropped to a three-week low on speculation that the global economic recovery is slowing and a stronger dollar will reduce investment demand.

Crude oil fell from an eight-week high, reducing demand for the crops to make fuel. Two months of ample rain boosted yield prospects for plants in Brazil and Argentina, slowing demand for U.S. grain. The South American nations are the biggest exporters after the U.S. Commodities dropped as the dollar gained, making U.S. supplies more expensive for overseas buyers.

“The dollar is stronger and crude oil is weaker, reducing buying interest” from speculators, said Chad Henderson, a Prime Agricultural Consultants Inc. market analyst in Brookfield, Wisconsin. “The crops are getting bigger in South America and that should slow demand” for U.S. supplies, Henderson said.

Corn futures for May delivery fell 6 cents, or 1.6 percent, to $3.69 a bushel on the Chicago Board of Trade, after dropping 3 percent in the three previous sessions. The most-active contract touched $3.6825, the lowest price since Feb. 19.

Soybean futures for May delivery slid 0.5 cent to $9.475 a bushel after reaching $9.35, the lowest price for a most-active contract since Feb. 10. The price has fallen 9.6 percent this year on U.S. forecasts for production to rise 34 percent in Brazil and Argentina.

Brazil Crops

In Brazil, soybean output will rise 18 percent to 67.6 million metric tons from 2009, the Agriculture Ministry said today in an e-mailed report. Last month, the government estimated a crop of as much as 66.7 million tons.

Corn production is estimated at 51.4 million tons, up 0.8 percent from 2009 and unchanged from last month, the ministry said.

Corn and soybeans pared earlier losses partly because the U.S. Department of Agriculture is set to revise its U.S. and world crop output and demand estimates tomorrow, Henderson said.

“People did not want to go home short before the USDA reports,” Henderson said. “The downside is probably limited until farmers start to plant” corn and soybeans in the U.S. Midwest next month, he said.

Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government figures show.

By Jeff Wilson
Source: Bloomberg