US corn tumbles on liquidation as crude surges

* Corn posts sharp reversal after near 32-month high

 * Soybeans up as rains slow early Brazil harvest

 * Wheat erases early gains as corn sags

 By Julie Ingwersen

 CHICAGO, March 2 (Reuters) - U.S. corn futures fell 1.8
percent on Wednesday, their biggest drop since a limit-down
plunge last week, as a surge in U.S. crude oil prompted
investors to curb risk by selling long positions.

 Traders also exited the market by unwinding inter-market
spreads, selling corn against both wheat and soybeans.

 Soybeans rose for a second day, gaining against corn on
expectations that rain delays to the harvest in Brazil could
lift demand for U.S. supplies.

 Wheat ended narrowly mixed after volatile trade, with the
sell-off in corn erasing early gains tied to fresh export
demand. But dry weather in the Plains underpinned the market.

 On the Chicago Board of Trade, bellwether May corn CK1
ended down 14 cents at $7.21-1/2 per bushel, while May soybeans
SK1 were up 19 cents at $13.94-1/4 a bushel. May wheat WK1
settled up 1 cent at $8.11-1/4 a bushel.

 Corn futures fell after rising to a near 32-month high on
continuous price charts. The retreat began slowly as traders
booked profits and unwound long corn/short wheat spreads.

 But corn slumped at midsession, with nearby contracts
falling almost the daily limit of 30 cents a bushel, as U.S.
crude CLc1 rose to a session high above $102 a barrel.

 Crude advanced after an airstrike near Libya's oil
infrastructure raised the threat of a prolonged disruption from
the OPEC nation and fears that unrest might spread to other
regional producers. [ID:nL3E7E205X]

 The effect of spiking crude oil prices on the corn market
was reminiscent of the trade on Feb. 22, when corn fell its
daily limit as a jump in crude oil triggered heavy long
liquidation in grains.

 "The last time we had crude up, where it went $6 to $8
higher, the corn market went limit down," said Don Roose of
U.S. Commodities in West Des Moines, Iowa.

 "That has got people saying they don't want to chase the
crude oil up," Roose said.

 Added one cash-connected trader, "When you see the spikes
(in crude), when you see the uncertainty out there, people will
start to pull money back for a time."

 Front-month CBOT corn Cc1 posted a bearish key reversal
on daily price charts -- rising to a fresh contract high and
then closing below the previous day's trading range.

 SOYBEANS HIGHER; BRAZIL HARVEST EYED

 Soybeans rose as wet weather delayed the harvest of a
likely record-large crop in Brazil, the world's second-largest
soy supplier. As a result of the delays, traders this week said
China has been seeking U.S. soybeans to fill gaps.

 "It looks like China is back in looking for beans. That
combined with harvest delays in Brazil because of the weather
was enough to lift beans," said Joe Bedore, CBOT floor manager
for trade house FC Stone.

 Soybeans also drew support as the strength in crude oil
lifted soyoil, which is used to make biodiesel.

 Wheat was choppy, giving up early advances as corn tumbled.
Wheat rallied in early moves after the U.S. Department of
Agriculture confirmed sales of 220,000 tonnes of U.S. hard red
winter wheat to unknown destinations for the current 2010/2011
marketing year.

 Earlier this week, Saudi Arabia's grains authority said it
bought 275,000 tonnes of 12.5 percent protein hard wheat,
including four cargoes of U.S. wheat and one from Brazil.

 Concerns about crop weather in the United States lent
underlying support. Updated forecast models indicated that dry
weather would likely continue in the western U.S. Plains, a
reversal of some outlooks on Tuesday that called for rain.

 "Models show good agreement that dryness will persist in
wheat areas of the western Plains," the Commodity Weather
Group, a U.S. forecaster, said in a daily note.

 Prices at 2:24 p.m. CST (2024 GMT)

                          LAST      NET    PCT     YTD

                                    CHG    CHG     CHG
CBOT corn       Cc1      714.00   -13.25  -1.8%   13.5%
CBOT soy        Sc1     1387.25    19.75   1.4%   -0.5%
CBOT meal       SMc1     359.00     1.00   0.3%   -3.1%
CBOT soyoil     BOc1      58.27     1.20   2.1%    0.9%
CBOT wheat      Wc1      776.75     1.00   0.1%   -2.2%
CBOT rice       RRc1    1371.00   -14.00  -1.0%   -2.0%
EU wheat        BL2H1    256.75    -0.50  -0.2%    1.7%
US crude        CLc1     102.08     2.45   2.5%   11.7%
Dow Jones       .DJI     12,085       27   0.2%    4.4%
Gold            XAU=    1432.95    -1.40  -0.1%    1.0%
Euro/dollar     EUR=     1.3857   0.0082   0.6%    3.8%
Dollar Index    .DXY    76.6920  -0.3590  -0.5%   -3.0%
Baltic Freight  .BADI      1281       19   1.5%  -27.7%
 *Front month contracts. CBOT contracts in U.S. cents per
bushel except soymeal in dollars per ton, soyoil in cents per
lb and rice in cents per hundredweight. Paris wheat in euros
per tonne and London wheat in pounds per tonne

(Source: http://af.reuters.com/article/commoditiesNews/idAFLDE7211AA20110302)