Corn, Soybeans Drop as Oil Dips on Reduced Storm Damage Concern

By Jae Hur

Sept. 2 (Bloomberg) -- Corn plunged to a two-week low and soybeans tumbled as oil fell after Hurricane Gustav weakened before striking the Louisiana coast, driving the dollar higher and reducing demand for the crops as an alternative investment.

Crude oil traded near a four-month low after Gustav was downgraded to a Category 2 hurricane before crossing the coast and easing as it heads inland, reducing concern of major damage to rigs and refineries. The dollar rose to its highest since February against the euro.

``The sharp drop in crude prices is the driving factor behind the weakness in grains markets today,'' Toby Hassall, an analyst at Commodity Warrants Australia in Sydney, said by e-mail. ``The impact of Gustav was far less traumatic to the Gulf coastline than many had expected. The fear premium that had been built into crude prices was hastily wiped away.''

Corn for December delivery lost as much as 19.75 cents, or 3.4 percent, to trade at $5.6525 a bushel, the lowest since Aug. 19, in after-hours electronic trading on the Chicago Board of Trade. It traded at $5.6625 as of 10:16 a.m. Singapore time. The price has fallen 29 percent from a record $7.9925 on June 27. The Chicago market was closed yesterday for the Labor Day holiday.

Soybeans for November delivery fell 43.75 cents, or 3.3 percent, to $12.8025 a bushel, the lowest since Aug. 20, and last traded at $12.8575. Futures have declined 21 percent from a record $16.3675 on July 3.

The dollar rose as high as $1.4557 per euro, the highest since Feb. 14. Crude oil fell as much as 4.2 percent from the Aug. 29 close to $110.60 a barrel.

Wheat for December delivery declined as much as 19.25 cents, or 2.4 percent, to $7.82 a bushel, the lowest since Aug. 6, and last traded at $7.83. The contract lost 10 percent last week, the biggest drop since March 21.

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