Corn, Soybeans Drop as Investors Bet Demand Will Dry Up on Higher Prices

Corn, wheat and soybeans fell in Chicago as investors sold commodities on speculation higher prices and weaker economic growth will curb demand for raw materials, including those used to make food.

Corn surged 88 percent in the past year, wheat gained 49 percent and soybeans rose 38 percent as demand increased and stockpiles dwindled, pushing up food costs that were partly blamed for riots in the Middle East and North Africa. Investors are ignoring wet weather that’s slowing planting in the U.S., which supplies 29 percent of the world’s corn.

Commodities traders are in a “panic” to sell contracts, said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees $1 billion. Corn and soybeans headed for the biggest weekly declines since March as the Standard & Poor’s GSCI Index of 24 raw materials fell for a fifth day, the longest streak since August.

“It’s a fund selloff,” said Andrew Dewing, owner of Dewing Grain in Aylsham, England. “Lots of the consumers are not buying because, historically, prices have never been this high going forward. They’re not going to book forward at these prices.”

Corn for July delivery dropped 10.25 cents, or 1.4 percent, to $6.985 a bushel by 1:15 p.m. London time on the Chicago Board of Trade after touching $6.91, the lowest price since March 31. The grain has lost 7.7 percent this week, the most since the week ended March 11.

Soybeans, Wheat

Soybeans for July delivery fell 3 cents, or 0.2 percent, to $13.1875 a bushel. The oilseed touched $13.065 a bushel, the lowest level since March 17, and is down 5.4 percent this week.

Wheat for July delivery rose 1 cent to $7.55 a bushel after falling as much as 1.9 percent to $7.40, the lowest price since March 31. The grain has tumbled 5.8 percent this week, the most in three weeks. Milling wheat for May delivery traded on NYSE Liffe in Paris dropped 3 euros, or 1.2 percent, to 241.25 euros ($350.92) a metric ton.

Prices that reached two-year highs in 2011 may crimp demand as the cost of living in the U.S. rose at its fastest pace since December 2009 in the 12 months ended in March. Chinese consumer prices rose last month by the most since 2008. The People’s Bank of China raised borrowing costs four times since October, and the European Central Bank increased rates on April 7 for the first time since 2008.

Export Sales

Corn sales from the U.S. fell 55 percent in the week ended April 28 from the prior seven days and soybean sales dropped to 21,206 tons from 199,212 tons, the Department of Agriculture said yesterday in a report. The U.S. is the largest exporter of both commodities.

An index of food prices rose to a record 237.2 points in February before falling in March, United Nations data show. The UN’s Food and Agriculture Organization said yesterday the gauge of 55 commodities rose to 232.1 points in April. World Bank President Robert Zoellick said April 16 the world is “one shock away” from a food crisis.

Global corn stockpiles probably will fall 16 percent to the lowest in four years by Aug. 31 as consumption rises 37 percent, USDA data show.

Production estimated on April 8 at 814.9 million tons may be revised lower when the U.S. government releases its next supply-and-demand report, Dewing said. Because of the wet weather, 13 percent of the U.S. corn crop was seeded as of May 1, down from a five-year average of 40 percent, USDA data show.

“There’s no way the U.S. is going to write that the crop is up,” Dewing said. “The weather is not going away. They’re not getting the corn in the ground.”

(Source: http://www.bloomberg.com/news/2011-05-06/corn-soybeans-drop-as-investors-bet-demand-will-dry-up-on-higher-prices.html)