Soybeans, Corn Fall as Gains Seen Overdone, Crude Oil Declines

By Jae Hur

Aug. 19 (Bloomberg) -- Soybeans and corn declined as investors bet yesterday's gains prompted by the dollar's drop were excessive and on speculation recent losses in crude oil may reduce demand prospects for biofuel made from the crops.

Soybeans rose the 70-cent daily limit yesterday and corn advanced 4.2 percent as the dollar dropped as much as 0.5 percent against a weighted basket of six currencies including the yen and euro. Overseas buyers have more purchasing power when the dollar is weak.

``The dollar has been dictating direction for grains and other commodities in recent trading,'' Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank, said today in Seoul. ``But yesterday's gains in soybeans and corn on the dollar's weakness were too much.''

Soybeans for November delivery lost as much as 20.75 cents, or 1.6 percent, to $12.6825 a bushel in after-hours electronic trading on the Chicago Board of Trade and traded at $12.695 as of 11:13 a.m. in Singapore. The most-active contract has lost 22 percent since reaching a record $16.3675 on July 3.

Corn for December delivery fell as much as 10 cents, or 1.8 percent, to $5.6275 a bushel and last traded at $5.6375. Futures have fallen 29 percent from reaching a record $7.9925 on June 27.

Crude oil fell for a fourth day in New York on forecasts Tropical Storm Fay will miss rigs and platforms in the Gulf of Mexico, which accounts for about a fifth of U.S. production. Crude oil for September delivery fell as much as 0.7 percent, to $112.10 a barrel on the New York Mercantile Exchange.

Dollar Direction

The dollar was little changed against the euro and yen before government reports forecast to show U.S. housing starts fell last month to the lowest level in 17 years and wholesale costs rose at a slower pace. The U.S. currency may decline for a second day on concern the government will be forced to bail out mortgage financiers Fannie Mae and Freddie Mac.

Soybeans were rated 62 percent good or excellent as of Aug. 17, down from 63 percent the prior week, according to a U.S. Department of Agriculture report. That's up from 54 percent the prior year, government data show.

Some 67 percent of the corn crop received top ratings, on par with the previous week, and up from 58 percent a year earlier, the USDA report said yesterday after the close of trading on the Chicago market.

``The weekly crop condition reports were neutral for corn and soybeans,'' said Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co.

Wheat for December delivery declined as much as 17.5 cents, or 2 percent, to $8.6725 a bushel and stood at $8.71 as of 11:06 a.m. Singapore time. The contract, which gained 4.2 percent yesterday, has lost 35 percent since reaching a record $13.495 on Feb. 27.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net