Corn, Soybeans Decline on Favorable U.S. Crops Weather Prospect

By Jae Hur and Sungwoo Park

July 21 (Bloomberg) -- Corn and soybeans dropped to their lowest in more than a month on speculation warm and wet Midwest weather will improve the U.S. crops' prospect and declining oil costs may cut demand for biofuel, easing inflation concern.

Corn lost 11 percent last week, the most since July 1996, while soybeans declined 9.3 percent last week, the most since mid-March. Wheat fell to the lowest since June 6. Oil also lost 11 percent last week, the most since Dec. 2004 on signs of slowing global economic growth and faltering U.S. fuel demand.

With crude oil surging to an all time-high above $145 a barrel, prices for corn, soybeans, wheat and rice reached records this year, spurring riots from Haiti to Egypt and Cameroon and producing countries, including China and Egypt, to curb exports to safeguard domestic supplies and cool inflation.

Corn has been pressured lower from ``the combination of improved Midwest weather in addition to heavy spillover pressure from the sharp break in crude prices,'' Toby Hassall, an analyst at Commodity Warrants Australia in Sydney, said in an e-mail.

Corn for December delivery fell as much as 2.2 percent to $6.15 a bushel, the lowest since June 5, in after-hours trading on the Chicago Board of Trade and traded at $6.215 a bushel at 1:34 p.m. Singapore time.

Futures declined 22 percent from a record $7.9925 on June 27. The price is still up 76 percent in the past year on increasing global demand to feed livestock and biofuel.

Soybeans

Soybeans for November delivery dropped as much as 18 cents, or 1.2 percent, to $14.30 a bushel, the lowest since June 10, and traded at $14.39 as of 1:43 p.m. Singapore time. Futures have plunged 8 percent since reaching a record $16.3675 on July 3. The price is still up 76 percent in the past year on rising demand.

Soybeans were under pressure from corn's drop, slumping crude oil and the Argentine Senate's rejection last week of the export tax legislation which will have the effect of reducing demand for U.S. exports, Hassall said.

Crude oil rose today from a six-week low set July 18, with the contract for August delivery gaining as much as 1 percent to $130.13 a barrel.

Recent losses in grains coupled with the drops in oil prices will ``definitely go some way to easing central bankers' concerns over inflationary pressures, although it would be premature to call an end to the commodities bull market,'' Hassall said.

Australia

Wheat for September delivery dropped as much as 2.2 percent to $7.8625 a bushel and traded at $7.9650 by 1:51 p.m. Singapore time. Prices have fallen 41 percent from a record $13.495 on Feb. 27 as higher prices spurred farmers to plant more.

Parts of Western Australia state, the nation's biggest wheat grower, may get more rainfall this week, a forecaster said. Rain is critical in coming months to bolster crop yields in Australia, forecast to be the third-largest wheat exporter.

The southwest of Western Australia may get 20-50 millimeters of rainfall in the next eight days with precipitation heavier near the coast, said David Jones, head of climate analysis with the Bureau of Meteorology. It will be mostly dry in other grain growing areas, he said.

``The extent of the West Australian crop largely determines how much wheat we have to export,'' from Australia, Richard Koch, managing director of Perth-based forecaster ProFarmer Australia, said in an interview with Bloomberg Television today.

To contact the reporters responsible for this story: Jae Hur in Singapore at jhur1@bloomberg.net; Sungwoo Park at spark47@bloomberg.net