CHICAGO: US corn and soybean futures plunged 2 percent on Monday from record highs set the previous session on forecasts for rain this week in the parched northern US Midwest, said traders who also cited dropping equities markets.
Wheat fell 3 percent from a near four-year high notched late last week. Tumbling corn and soybeans led the way down as renewed fears over Europe's debt crisis hit markets running the gamut from equities to bonds to commodities.
Rain will fall early this week in the northern US Midwest, with from 1 to 2 inches expected across a broad swath of corn and soybean land roughly north of Interstate 80, an agricultural meteorologist predicted Monday.
"It's good news and bad news today. The good is rain north of I-80 with widespread coverage and temperatures in the mid to low 90s degrees Fahrenheit," said John Dee of Global Weather Monitoring.
"The bad news is it will still be hot and dry south of I-80 and temperatures will reach the 100s F in most of Iowa, Missouri and Illinois with little or no rainfall," Dee said.
Showers should come to the southern Midwest late in the week. "They will receive some rain on the order of 0.40 to 0.80 inch late in the week with good coverage. Missouri and western Iowa may get shorted though," Dee said.
The most expansive drought in more than half a century has been harming the US corn and soybean crops, leading to cuts in estimated production. The lack of rain was drying up waterways and beginning to slow river shipments of commodities to export ports on the Gulf of Mexico.
"We don't think the rally is over year yet, especially for corn as demand rationing, which the market has to do, is something it has never done before in terms of the scale," said Victor Thianpiriya, agricultural commodity strategist at ANZ. "The supply situation for corn and soybeans is extremely tight."
At 7:22 a.m. CDT (1222 GMT), Chicago Board of trade September corn was down 23-1/2 cents at $8.01 per bushel, August soybeans were down 41 cents at $17.16-3/4 and September wheat was down 33 cents at $9.10-1/4.
"We are seeing risk aversion throughout the financial markets," said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia. "Crude oil is trading in negative territory, the US dollar index has opened higher, and the Aussie dollar has lost more ground this morning."
Shares fell and the euro stayed vulnerable after hitting fresh lows early on Monday, as concerns grew about Spain's ability to stave off a sovereign bailout.
Investors will also get price direction from Monday's crop progress report from the US government that is expected to show another decline in the condition of corn and soybeans crops in the world's largest exporter of grains.
Traders are expecting a 3 to 5 percentage point drop in the condition-ratings for both corn and soybeans.
Large speculators raised their net long stake in corn to the biggest in more than three months as the US drought triggered a sharp rise in corn prices, regulatory data released on Friday showed.
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