Corn, Wheat Fall as Highest Prices Since 2008 May Curb Demand

Corn and wheat fell in Chicago, erasing gains, on speculation that the highest prices in more than two years will discourage demand.

Corn reached the highest level since July 2008, sparking concern that buyers may slow purchases of the grain. Soybeans rose to a 31-month high on Feb. 9, and wheat touched the highest price since August 2008 five days later. Rainfall in China and Argentina and moderate temperatures in the U.S., where frost damage was a concern, may have pressured prices.

“We’re already seeing demand being rationed and some substitutions taking place,” said Kona Haque, an analyst at Macquarie Bank Ltd. in London. “In soybeans, crops out of Brazil and Argentina are being talked up because of recent rains.”

Corn for May delivery fell 4.25 cents, or 0.6 percent, to $7.16 a bushel at 11:43 a.m. Londontime on the Chicago Board of Trade, erasing a climb as high as $7.4425. Soybeans lost 3 cents, or 0.2 percent, to $13.78 a bushel. The exchange was closed yesterday to observe Presidents’ Day.

Wheat for May delivery dropped 13.5 cents, or 1.6 percent, to $8.425 a bushel. Milling wheat for March delivery traded on NYSE Liffe in Paris slid 1.3 percent to 256.50 euros ($349.71) a metric ton.

Milder Weather

Chicago-traded wheat slid 3.1 percent on Feb. 18, rounding out the biggest weekly drop since October. Moderate temperatures in the U.S. southern Great Plains reduced concern about damage from freezing weather, Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report today. He also pointed to efforts to restrain inflation in China.

The grain fell “due to milder weather in the U.S. growing regions that has helped to calm fears of frost damage and the restrictive economic measures in China,” Fritsch said in the report “Both have prompted market players to profit-taking at the high price levels.”

Prices still may be supported by political strife in North Africa, where riots partly sparked by rising food costs toppled presidents in Tunisia and Egypt this year. Muammar Qaddafi’s 40- year rule of Libya is now in jeopardy.

“Because food inflation is such a political issue, governments cannot be seen just sitting there watching food prices rise,” Macquarie’s Haque said by telephone today. “They have to stockpile. The only thing worse than an angry mob is a hungry mob.”

(Source: http://www.bloomberg.com/news/2011-02-22/corn-wheat-drop-as-highest-prices-in-more-than-two-years-may-erode-demand.html)