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

By Jae Hur

Sept. 2 (Bloomberg) -- Corn plunged by the trading limit and soybeans tumbled as oil fell after Hurricane Gustav passed the U.S. Gulf Coast without causing major damage, driving the dollar up and reducing demand for the crops as an alternative investment.

Crude oil slumped to the lowest in five months after Gustav was downgraded to a Category 2 hurricane before it crossed the coast and weakened as it moved 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 fell as much as 30 cents, or 5.1 percent, to $5.55 a bushel, the lowest since Aug. 18, in after- hours electronic trading on the Chicago Board of Trade. The contract was at $5.5725 at midday London time. The price has fallen 30 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 as much as 69 cents, or 5.2 percent, to $12.55 a bushel, the lowest since Aug. 18, and last traded at $12.565. Futures have declined 23 percent from a record $16.3675 on July 3.

Brazil, the world's second-biggest soybean producer exported 2.36 million metric tons of the oilseed in August, down 12 percent from a year earlier, the Trade Ministry said yesterday on its Web site.

Dollar Gains

The dollar rose as high as $1.4485 per euro, the highest since Feb. 11. Crude oil fell as much as 8.7 percent from the Aug. 29 close to $105.46 a barrel, the lowest since April 4.

Wheat for December delivery fell as much as 40.25 cents, or 5 percent, to $7.61 a bushel, before trading at $7.675 a bushel at midday in London. The contract lost 10 percent last week, the biggest drop since March 21. Futures fell 43 percent from a record $13.495 on Feb. 27.

Australia, forecast to be the world's third-largest wheat exporter, may get rain this week in grain growing areas, with heavier falls expected in the nation's west, the National Climate Center said.

Western Australia, the country's biggest wheat grower, may get between 15 millimeters (0.6 inch) and 25 millimeters of rain, with rainfall above 25 millimeters in some parts, Shoni Dawkins, climatologist with the center said yesterday from Melbourne. Other grain growing regions will get 5-10 millimeters, he said.

Dry weather in August in the country had raised concern production may be limited in some areas. Grain growers need rain between now and the harvest, starting about November, to boost yields.

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