Bloomberg News

Corn, Wheat Slide as European Debt Crisis Concerns Curb Demand

September 06, 2011

Sept. 6 (Bloomberg) -- Corn and wheat dropped on concerns that Europe’s sovereign-debt crisis will worsen and dent the outlook for the global economy, damping demand for grains. Soybeans also declined.

December-delivery corn fell as much as 1.7 percent to $7.4725 a bushel on the Chicago Board of Trade and traded at $7.50 by 2:45 p.m. in Singapore. Futures climbed 15 percent last month and are up 19 percent this year.

European equities slumped yesterday after an election loss for German Chancellor Angela Merkel’s party boosted concern that opposition to bailouts of Europe’s indebted nations may increase. U.S. stock futures fell today, indicating the Standard & Poor’s 500 Index may slide for a third day.

“The movements we’ve had in the grain markets simply reflect a catch-up to the global risk-off appetite that has swept through the financial markets over the past couple of sessions,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said by phone from Sydney. “The agricultural markets, despite the fact that supplies are tight, have currently been caught up in that selling pressure.”

The Stoxx Europe 600 Index lost 4.1 percent to 223.45 yesterday as all 19 industry groups dropped. Standard & Poor’s 500 Index futures expiring in September fell as much as 2.8 percent today. The MSCI Asia Pacific Index dropped as much as 1.8 percent, heading for a third day of declines. U.S. markets were closed for Labor Day yesterday.

Debt Debate

Finance ministers from Germany, Finland and the Netherlands will meet today to discuss a Finnish demand for collateral in a bailout for Greece. Italian lawmakers will debate an austerity plan amid a strike called by the nation’s biggest union.

“The grain market is currently being torn between the darkening global economic outlook and extremely tight coarse grain supplies,” Mathews wrote in an e-mailed report today.

Global corn stockpiles were forecast by the U.S. Department of Agriculture to plunge in the 2011-2012 season to 114.5 million metric tons. That would be the lowest level in five years as hot weather in the U.S., the world’s largest grower and exporter, curbs yields and demand climbs.

Demand for wheat will exceed production for a second straight year in 2011-2012, while global production of soybeans will drop 2.5 percent from a year earlier to 257.5 million tons, according to the agency.

Wheat for December delivery slumped 1.4 percent to $7.65 a bushel, after gaining 11 percent last month. Soybeans for November delivery fell 1.3 percent to $14.2775 a bushel. The oilseed advanced 1.6 percent last week.

--Editors: Jarrett Banks, Ovais Subhani

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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