Corn, Soybeans Fall as Firmer Dollar, Oil Drop Reduce Demand

By Jae Hur

Jan. 8 (Bloomberg) -- Corn, soybeans and wheat fell for a second day after crude oil tumbled, eroding demand prospects for the crops as a source for alternative fuel, and as the dollar rose, making U.S. supplies more expensive for overseas buyers.

Crude oil plunged 12 percent yesterday, the biggest drop since Sept. 24, 2001, as a U.S. government report showed bigger- than-expected gains in supplies of crude, gasoline and distillate fuel. Corn and soybeans both dropped 2.6 percent yesterday.

“If we see crude prices extend Wednesday’s falls then this may encourage further profit-taking in grains following the rally of recent weeks,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney.

Corn for March delivery declined as much as 1.8 percent to $4.09 a bushel in after-hours trading on the Chicago Board of Trade and was at $4.1075 at 2:50 p.m. in Singapore. The price reached $4.29 on Jan. 6, the highest since Oct. 30.

Soybeans for March delivery dropped as much as 1.4 percent to $9.7625 a bushel and last traded at $9.8450. The price yesterday touched $10.23, the highest since Oct. 3. Before today, the oilseed had advanced 28 percent since touching an 18-month low of $7.7625 on Dec. 5 amid concern about dry weather in Brazil and Argentina.

“We still have stressed crops in South American growing regions with associated yield risks which should ensure any downward movement in grains prices is short-lived,” Hassall said.

Corn prices that reached a record $7.9925 a bushel last year are headed for a decade-long slump below $4 as production in the U.S., the world’s top grower, catches up with demand, according to analysts from the Congressional Budget Office.

Price Forecast

The average cash price will bottom out at $3.65 in the 2012- 2013 marketing year, then rise no higher than $3.94 through 2019, the analysts said in a document used as part of a government-wide estimate of federal spending over the next decade.

Soybeans, the second-most-valuable U.S. crop, will average $9 a bushel this year, then fall as low as $8.44 in 2012-2013 before rising to a peak of $9.04 in 2015-2016. The average wheat price is forecast to tumble to $5.60 next year from $6.70 during the marketing year that ends May 31, and never rise above that price over the next decade.

Wheat for March delivery declined as much as 2.1 percent to $6.005 a bushel and traded at $6.03 by 2:53 p.m. Singapore time. The contract fell 4.7 percent yesterday, the biggest drop since Dec. 4, after touching $6.4625, the highest since Oct. 3.

Crude oil was up 1.3 percent at $43.17 a barrel by 2:53 p.m. in Singapore on the New York Mercantile Exchange. The euro traded at $1.3633 from $1.3644 late yesterday in New York. The euro touched $1.3313 on Jan. 6, the lowest level since Dec. 12.

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