Corn, Soybeans Fall to Year's Lowest Prices on Demand Outlook

By Jeff Wilson

Oct. 15 (Bloomberg) -- Corn and soybeans fell to the lowest prices of the year on speculation that a government plan to rescue banks will fail to prevent a global slowdown, leading to reduced demand for food, animal feed and crop-based fuel.

U.S. retail sales dropped in September by the most in three years as rising job losses and plunging home prices slowed consumer purchases, the Commerce Department said today. Corn prices are down 51 percent from a record in June and soybeans are the cheapest in 13 months, down 48 percent from the highest ever in July.

``It still continues to be concerns about the economy and its impact on grain demand,'' said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa. ``Just because there may be a thawing in the banking system does not mean there will be demand for new loans. People fear more problems.''

Corn futures for December delivery fell 23.25 cents, or 5.7 percent, to $3.88 a bushel on the Chicago Board of Trade, and touched $3.8475 the lowest since Nov. 19, 2007. The most-active contract has plunged 20 percent this month after dropping a record 36 percent in the quarter ended Sept. 30.

Soybean futures for November delivery fell 38 cents, or 4.2 percent, to $8.58 a bushel in Chicago. The price earlier touched $8.465, the lowest for a most-active contract since Aug. 27, 2007. Soybeans reached a record $16.3675 on July 3.



The Standard & Poor's Commodity Index of 24 raw materials fell as much as 4.7 percent to a 13-month low. The index is down 46 percent since reaching a record on July 3. Crude oil fell below $75 a barrel for the first time since September 2007.

``The key is the crude-oil market and when falling energy prices begin to help boost consumer confidence,'' Roose said. ``There will be businesses that benefit from falling oil prices.''

Slowing Economy

Grain and soybean prices are falling as investors reduce bets on higher inflation as the economy slows, analysts said.

The unemployment rate in the U.S. may rise as economic growth in coming quarters expands at an anemic pace, Federal Reserve Bank of Boston president Eric Rosengren said today. San Francisco Fed President Janet Yellen said yesterday that the U.S. already is in recession.

Federal Reserve Chairman Ben S. Bernanke said government efforts to calm financial markets and stem the credit crisis probably won't result in an immediate economic rebound, though the pace of inflation may slow.

``Historic markets like we saw this year in the grains often overshoot economic value to the topside before undershooting it to the downside,'' said Jim Gerlach, president of A/C Trading Inc. in Fowler, Indiana. ``There is risk in corn down to $3.25 to $3.50 a bushel in the coming weeks and $7.50 to $8 in soybeans.''

Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show. The U.S. is the world's biggest grower and exporter of both crops.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net