Corn, Wheat Decline on Falling Energy Costs, Japan Grain Plan

By Sungwoo Park

July 23 (Bloomberg) -- Corn fell to the lowest in almost two months amid speculation falling energy costs will diminish the appeal of commodities as a hedge against inflation and as Japan plans to cut imports of the grain. Wheat and soybeans dropped.

Crude oil traded near a six-week low on forecasts that a tropical storm in the Gulf of Mexico will miss oil fields and refineries, reducing the chance of supply disruption. Japan, the world's biggest grain importer, plans to boost rice production for feed and flour to reduce corn and wheat imports.

``The biggest reason for falls in corn is falling crude oil prices, which reduced the appetite for hedging against inflation,'' Andy Lee, a manager at the international business team of Tong Yang Futures Trading Co. in Seoul, said by phone today. ``Sentiment wise, Japan's plans to cut dependency on corn and wheat is also pressuring the grains.''

Corn for December delivery fell as much as 11 cents, or 1.9 percent, to $5.8125 a bushel, the lowest since May 30 in after- hours trading on the Chicago Board of Trade and traded at $5.815 at 12:52 p.m. in Seoul. Futures yesterday fell as much as 3 percent as recent rain was expected to improve crop conditions. Corn has fallen 27 percent from a record $7.9925 on June 27.

Crude oil for August delivery was little changed at $127.97 a barrel at 12:43 p.m. Seoul time on the New York Mercantile Exchange. Futures fell as much as 4.1 percent yesterday before settling at $127.95 a barrel, the lowest since June 5.

Japan, which imports more than 60 percent of its food requirements, the highest level among developed countries, wants to become less dependent on overseas grain supplies to protect it from soaring international prices and ensure long-term security of supply, Yuji Sawa, vice minister of Agriculture, Forestry and Fisheries, said in an interview.

Wheat Drops

Wheat for September delivery dropped 1 percent to $7.89 a bushel at 12:47 p.m. Seoul time. Prices have declined 42 percent from a record $13.495 on Feb. 27 as higher prices spurred farmers to plant more.

Soybeans for November delivery tumbled as much as 23 cents, or 1.6 percent, to $13.86 a bushel and traded at $13.865 as of 12:48 p.m. Seoul time. Futures have fallen 15 percent since reaching a record $16.3675 on July 3.

South Africa, the biggest corn producer in Africa, may increase its forecast for this year's crop by 1.7 percent, according to a Bloomberg survey of grain traders.

To contact the reporters responsible for this story: Sungwoo Park at spark47@bloomberg.net