Wheat, corn extend losses as economic worries weigh

SINGAPORE/MILAN: Chicago corn hit a one-week low on Friday and wheat and soybeans lost more ground as renewed concerns over the US economy sliding into a recession hammered commodities and equities.
A sell-off in global stocks gathered pace on Friday as nervous investors fled to the safety of core government bonds, Swiss francs and gold, with many seeking to unwind holdings of riskier assets such as stocks, commodities and higher-yielding currencies before the weekend. Economic fears tend to weigh on grains by raising demand concerns, while a stronger dollar adds pressure by making commodities priced in the US currency more expensive to holders of other currencies.
Still, tight global supplies of corn and worries about US wheat output are likely to limit losses in the agricultural markets as buyers take the opportunity to lock supplies.
“Agriculturals have not completely avoided the downward pull of financial and commodity markets either. Even so, they are standing their ground comparatively well, which we think is mainly due to their non-cyclical or crisis-proof character,” Commerzbank analysts wrote in a note on Friday.
Chicago Board of Trade September wheat fell 0.11 percent to $7.07 a bushel. Actively traded December corn lost 0.2 percent to $7.11-1/2 a bushel by 1105 GMT, after earlier dropping to $706-1/4, lowest since Aug. 11.
November soy fell 0.37 percent to $13.56 a bushel.
Soybeans are on track to finish the week on a positive note following three weeks of losses. Corn is set to drop this week after rising for two weeks, while wheat is likely to finish higher adding to previous two weeks of gains. “The current weakness of grain and oilseed prices could well be explained by the strength of the US dollar alone,” Commerzbank said. “US wheat is still in high demand at the moment though, as the latest export figures show.
The dollar rose against the euro on Friday with many analysts expecting the US currency to be supported by the view that it will rise as signs grow that financial institutions may be facing funding problems. European wheat futures eased in light trade, but the drop was modest in keeping with US futures and amid continuing crop concerns in the United States and Germany.
Euronext benchmark November milling wheat was down one euro or 0.51 percent at 196.50 euros a tonne by 1109 GMT, underpinned by a support level around 195 euros.
“As long as corn doesn’t fall harder we shouldn’t either,” a French dealer said. “We need to watch the Chicago session to see if corn gets nervous … If oil continues to fall corn will have to give ground as it will be too expensive for ethanol.” Crude oil fell to near $79 a barrel as investors remained fearful of an economic recession after being disappointed by US data on Thursday. Operators said European wheat was also finding a floor in Russian wheat prices, which were rising after a wave of export sales since a grain embargo was lifted on July 1.
“Prices are converging and as long as Russian wheat is rising we shouldn’t really fall,” the dealer said. “I don’t see Paris wheat below 185 euros in the next two months if Russian wheat is rising.”
In more export news, milling wheat is expected to dominate Ukraine’s 2011 harvest with the share of milling wheat reaching 70 percent of new crops as of Aug 18, Ukraine’s Farm Ministry said on Friday, while analysts and traders have expected a much smaller share of food wheat.
US wheat remains underpinned by detrimental harvest conditions for the US spring wheat crop and lack of adequate soil moisture for winter crop planting, even though Egypt’s purchase of Russian and Romanian cargoes has weighed on the market.
The weather in the US is expected to be favourable for corn and soybean crops.
Light rainfall and moderate temperatures from Thursday through early next week in the US Midwest will stabilise the corn crop and give a boost to pod-setting soybeans, an agricultural meteorologist said.
The marker noted news that China, the world’s biggest soy importer, plans to auction 4 million tonnes of beans from its state reserves in a bid to contain prices. reuters

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