BEIJING: Chicago corn, wheat and soy fell on Tuesday following a 3 percent jump in the previous session, on concerns soaring inflation in China could spark another interest rate hike this year and ahead of a US Federal Reserve rate decision this week.
Front-month CBOT wheat prices fell nearly 1.9 percent to $8.10-1/2 a bushel by 0520 GMT after prices rallied on Monday over a lack of rain for the US hard red winter wheat in the southwest. CBOT corn dropped more than 1 percent to $7.54-1/2 a bushel.
Soybeans also lost more than 1 percent to $13.75-1/2.
China has moved aggressively this year to cool inflation and surprised markets by announcing interest rate hikes and increases in the amount of cash banks must hold in reserves at odd times such as weekends and over holidays, leaving investors concerned Beijing may use the May 2 long weekend to announce additional tightening.
The Federal Reserve is not expected to cut interest rates or change its $600 million bond buying program, but a groundbreaking press conference by Chairman Ben Bernanke after the rate decision is expected to set a tone for markets leading to profit taking on Tuesday, market players said.
"CBOT trading weakened amid a wide commodities sell-off" ahead of the Fed meeting, said Ricky Chan, senior account manager with ADMIS Hong Kong Limited.
"There is also market talk that China may raise interest rate again to curb inflation, which has also pressured metals and stock markets."
A state-backed newspaper reported that China's annual inflation could edge up to 5.5 percent in April, giving the central bank scope to further tighten monetary policy.
Asian shares pulled back from recent three-year peaks while commodity prices succumbed to a bout of profit-taking after silver fell more than 3 percent.
The dollar strengthened against a basket of currencies on Tuesday, also pressuring prices downward. A stronger dollar weighs on greenback-priced commodities.
Soybeans also face pressure from a big harvest in Brazil and Argentina and a slowdown in imports by China, the world's top soy importer.
"A large South American supply of 10 million tonnes more than earlier expected, in addition to Chinese government sales of 3 million tonnes of reserves, do not support CBOT (Chicago Board of Trade) soy prices at the current level," said Wang Zairong, an analyst with COFCO Futures Co. Ltd.
But traders expect China's soy demand to pick up in the second half of the year as animal feed production gets into full swing, spurring soymeal demand.
Corn planting virtually stalled in key growing states around the US Midwest last week on excessive rains. Farmers had planted 9 percent of their anticipated corn acreage by April 24, lower than the 13 percent analysts had expected.
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