US corn drops for 2nd day, spooked by MF Global

Trading in Chicago grain and oilseed markets was thin as the bankruptcy forced investors to scramble to untangle positions.

Renewed worries about the slow progress in resolving the euro zone's debt crisis dampened investor appetite for risk, sending Asian shares and commodities lower on Tuesday while keeping pressure on the euro.

"The market is looking at continued uncertainty regarding the state of the European economy," said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia.

Chicago Board of Trade December corn fell 0.4 percent to $6.44-3/4 a bushel by 0619 GMT, while December wheat fell quarter of a cent to $6.28 a bushel, after dropping 2.5 percent in the previous session. Actively traded January soy also fell quarter of a cent to $12.17 a bushel.

The US-based futures brokerage MF Global filed for bankruptcy protection following bad bets on euro zone debt. Its meltdown in less than a week made it the biggest US casualty of Europe's debt crisis and the seventh-largest bankruptcy by assets in US history.

MF Global was one of the key players in the Australian agricultural futures market, actively promoting new initiatives such as the introduction of the Western Australian wheat futures contract early last year.

"The issue of MF Global is certainly throwing the Australian grain market into limbo at the moment," said Mathews. "MF Global is large holder of ASX grain contracts and because of those issues the ASX has suspended trade for the moment."

Trading in Australian grain futures and options was suspended on bourse operator ASX Ltd's futures platform following the collapse of MF Global. The CME Group and London Metal Exchange separately said they suspended MF Global Inc from trading.

Dougal Hunter, ASX's manager for agricultural derivatives, said the exchange planned to issue a statement as soon as possible but declined to make further comment.

The wheat market rose almost 1 percent earlier in the day, supported by dry weather in Ukraine which could hurt crops.

The share of sprouted Ukrainian winter grain crops which were in poor state jumped to 39 percent as of Oct. 27 from 29 percent as of Oct. 24, the Agriculture Ministry said on Friday, quoting data from regions.

It said farms had sown 7.7 million hectares of winter grains for the 2012 harvest and 4.5 million had sprouted so far. The ministry added that 3.1 million hectares of the sprouted crops were in good or satisfactory condition while 1.4 million hectares were in poor state.

Even though US grains futures dropped on Monday, during October wheat was up around 3 percent, corn gained 9 percent and soybeans rose 2.4 percent.

About 89 percent of the US winter wheat crop had been planted by last Sunday, in line with the normal seasonal pace of 88 percent, the US Department of Agriculture reported in its weekly crop progress report, released after trading closed in Chicago on Monday.

The USDA reported US wheat emergence was 68 percent versus the normal rate of 72 percent, and 46 percent of the crop was rated good-to-excellent, in line with last year but down one percentage point for the week.

The US corn harvest continued strongly, with progress rising to 78 percent complete from 65 percent a week earlier and a 5-year average of 62 percent complete.

The US soybean harvest was 87 percent complete, according to the USDA, up from 80 percent the week before and above the five-year average of 79 percent.

Copyright Reuters, 2011