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US grains fall on sliding oil, surging dollar

PARIS/SYDNEY - US grain futures fell in electronic trade on Wednesday, extending losses in the previous session, as crude oil dipped and the dollar climbed on concerns about a global economic downturn.

Traders said soy and grains markets remained vulnerable to volatility in oil and financial markets.

‘We have seen an almost perfect correlation between grains and financial markets in recent weeks,’ a European trader said.

‘News about fundamentals has been put to one side.’

Chicago Board of Trade December corn lost 3.77 percent to $3.95-1/2 per bushel by 11105 GMT, while soybean futures for November delivery fell 1.95 percent to $8.90-1/4.

December wheat shed 2.19 percent to $5.37 per bushel.

NYMEX light crude for December delivery dropped 3.6 percent to $69.56 a barrel, while the dollar hit a two-year high against the euro and a basket of currencies.

A stronger dollar pressures US commodities by making them more expensive for overseas buyers.

In Paris, Euronext futures found support in the weaker euro, which is favourable for exports from the bloc.

Benchmark milling wheat inched up 0.50 euros to 144.00 euros after adding 1.25 euros on Tuesday.

‘The rise is a slight adjustment in relation to the euro,’ one trader said.

The dollar jumped to a two-year high against a basket of currencies on Wednesday as investors bet that interest rates outside the US will be cut sharply to bolster global growth.

The market will be looking for the results of tenders from Tunisia and Egypt later on Wednesday to see if EU wheat is competitive against rival origins, he added.

Front-month rapeseed futures in Paris also found support in the euro, adding 0.25 euros to 322.00 euros a tonne.

Global recession fears have pushed CBOT grains and oilseeds to their lowest levels in a year or more, after all three hit record highs earlier this year.

Kim Do-young, a trader at KB Futures in Seoul, said that with the global economy heading for a sharp slowdown and China's economy slowing to single-digit growth, concerns were mounting that the slowdown in commodities demand might be more significant than the market had thought.

‘We thought we were almost there near the bottom but it looks like there are still levels of underground that we have forgotten,’ said Kim.

Grains prices as of 1030 GMT

ProductLastChange Percent Move End 2007

Ytd Percent

move

CBOT corn396.00-15.00-3.65455.50-13.06

CBOT soy890.25-18.00-1.98 1199.00-25.75

CBOT wheat541.00-8.00-1.46885.00-38.87

CBOT rice15.01-0.12-0.8013.5510.77

Euronext wheat144.000.50+0.35210.00-31.43

US crude69.66

Euro/dollar1.2882

(Corn, soybean, wheat US cents per bushel)

(Rice US cents per hundredweight)

(Crude $ per barrel)

(Euronext wheat euros per tonne)