Bloomberg News

Grains Plunge as Favorable Weather Reviving U.S., Europe Crops

June 22, 2011

June 22 (Bloomberg) -- Corn fell the maximum allowed by the Chicago Board of Trade, wheat plunged to an eight-month low and soybeans tumbled on signs that changing weather conditions may improve crop prospects in the U.S. and Europe.

Hot weather next week in the U.S., the world’s largest exporter of all three crops, may be shorter than forecast, aiding newly planted corn and soybeans, according to World Weather Inc. Rain is forecast in Ukraine and Russia, and moisture this month in Europe may limit wheat-crop damage caused by drought in France and Germany, Alfred C. Toepfer International GmbH, a grain trader, said in a report.

July corn futures, the contract closest to delivery, are down 15 percent in Chicago since touching a record June 10. Wheat has slumped 14 percent this month, and soybeans touched the lowest in five weeks. In the past year, prices jumped as global demand rose faster than output, eroding grain inventories, while drought limited production in Europe and too much rain delayed planting in the U.S. and Canada.

“It’s looking more like a classic performance of a bull market having run out of gas,” said Dale Durchholz, the senior analyst for AgriVisor LLC in Bloomington. “Buying interest is lacking with the good grain harvests expected out of the Ukraine and Russia this year and U.S. crops improving.”

Corn futures for December delivery plunged the 30-cent limit, or 4.4 percent, to settle at $6.5025 a bushel at 1:15 p.m. on the CBOT. The July, September and March contracts also fell by the daily maximum, as did July 2012.

Soybean futures for November delivery declined 17.25 cents, or 1.3 percent, to $13.325 a bushel on the CBOT, after touching $13.2375, the lowest for a most-active contract since May 17.

Crop Conditions

About 70 percent of the corn crop and 68 percent of soybeans were in good or excellent condition as of June 19, the U.S. Department of Agriculture said this week.

“The crops are getting better,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “The government ratings are likely to show further improvement next week. Rain and warmer temperatures are just what the crops need.”

Wheat futures for September delivery slid 32.25 cents, or 4.6 percent, to $6.7325 a bushel in Chicago, after slumping as much as 7.8 percent to $6.5025, the lowest since Oct. 5.

Milling-wheat futures for November delivery tumbled 15.75 euros, or 7.4 percent, to 196.75 euros ($282.79) a metric ton on NYSE Liffe in Paris.

“It’s a race to the bottom between the EU market and U.S. market,” said Mike Zuzolo, the president of Global Commodity Analytics & Consulting in Lafayette, Indiana. “The Northern European areas getting rain is still being talked about.”

Greek Crisis

Grain and soybean prices also fell amid speculation that Greek Prime Minister George Papandreou will struggle to pass additional austerity measures, even after winning a confidence vote yesterday. The potential for defaults by Greece may dim prospects for the European economy, while growth in U.S. government debt risks a second financial crisis, said Allan Meltzer, a professor at Carnegie Mellon University

“Concern over sovereign credit is growing in international banking circles,” Bill Gary, the president of Commodity Information Systems Inc. in Oklahoma City said in a report. “With the EU in serious trouble and unsustainable debt problems in Japan and the U.S., fears are growing of a general retrenchment from risk-taking in many global markets.”

Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, government figures show. Wheat is the fourth-largest, valued at $13 billion, behind hay.

--Editors: Steve Stroth, Patrick McKiernan

To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net; Whitney McFerron in New York at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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