US corn, soy fall on recession fears, supply pressure

SINGAPORE: Chicago corn slid 0.7 percent on Tuesday, while soy fell around half a percent amid growing fears of a global recession and a rapidly progressing US harvest that is ensuring ample supplies.

Wheat fell 0.6 percent after climbing 1.7 percent in the last session on expectations of end-user demand following a heavy selloff in the grain markets.

Commodities and Asian stocks extended losses as investors continued to flee from riskier assets on growing doubts over Greece's ability to avoid default, fuelling fears of global financial turmoil and recession.

Euro zone finance ministers are reviewing the size of the private sector's involvement in a second international bailout package for Greece, a move that could undermine the aid programme and hasten the threat of a Greek default.

"From a fundamentals perspective the market is looking to see at what point this pullback in prices starts to simulate demand," said Brett Cooper, senior manager of markets at FCStone Australia.

"While business is getting done, the supply story in most of these grains is getting better, so there is not much incentive for people to cover."

Chicago Board of Trade December corn fell 0.7 percent to $5.88-1/4 a bushel, after hitting a 9-1/2 month low of $5.72-1/4 on Monday, while November soybeans fell 0.4 percent to $11.72-1/2 a bushel. December wheat fell 0.6 percent to $6.16 a bushel.

Corn in September suffered its biggest monthly decline in 15 years, losing more than a quarter of its value since hitting a record high of around $8 a bushel in June as a US government report showed larger than expected corn supply.

On Monday, brokerage INTL FC Stone added to the supply pressure by raising its forecast of the US 2011 corn yield to 148.7 bushels per acre, up 1.6 percent from its previous estimate of 146.3 bushels.

The firm estimated US 2011 corn production at 12.55 billion bushels, above its Sept. 1 forecast of 12.35 billion.

INTL FC Stone also raised its forecast of the US 2011 soybean yield to 42.8 bpa, up 4.3 percent from its month-ago forecast of 41.05.

Soybeans fell to a near one-year low on Monday and wheat traded at its lowest since July.

US Department of Agriculture reported that farmers have harvested 21 percent of the corn crop, up from 15 percent a week ago and not far from the five-year average of 23 percent.

It said after the market closed on Monday that 19 percent of the soybean crop has been harvested compared with just 5 percent a week ago and 25 percent in the past five-year average.

With a medium-term downtrend still intact, a bearish target of $11.26-1/4 per bushel is still valid for the CBOT soybeans November contract , Reuters technical analyst Wang Tao said.

Meteorologists say dry conditions and seasonal temperatures would allow US farmers to make rapid progress harvesting the 2011 corn and soybean crops.

Commodity funds were net buyers of an estimated 4,000 contracts of Chicago Board of Trade corn futures on Monday, trade sources said. They sold a net 2,000 soybean contracts and bought a net 5,000 wheat contracts.

Copyright Reuters, 2011