Forexpros – U.S. grain futures were mostly lower during European morning trade on Wednesday, with wheat prices falling more than 2% and soybeans hitting a seven-week low as investors shunned riskier assets amid growing fears over a Greek exit from the euro zone.
Elsewhere, corn bucked the downward trend across most of the commodities complex, edging modestly higher after plunging nearly 5% in the previous session.
Agricultural commodities were affected by broader market risk aversion as fears over a possible Greek exit from the euro zone intensified after former Greek Prime Minister Lucas Papademos warned that preparations for such an event were being considered.
Meanwhile, investors eyed a meeting of European leaders in Brussels later in the day, amid concerns over a divide between France’s new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.
The ongoing Greece fears weighed heavily on the euro, which hit a four-and-a-half month low against the U.S. dollar. The dollar index, meanwhile hit its highest level since September 2010 earlier in the session.
A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.
On the Chicago Mercantile Exchange, wheat for July delivery traded at USD6.7038 a bushel during European morning trade, tumbling 2.15%.
It earlier fell by 2.45% to trade at a three-day low of USD6.6763 a bushel. Prices touched USD7.2138 a bushel on May 21, the highest since September 13, 2011.
Wheat prices declined as investors cashed out of the market on forecasts for beneficial crop weather in the Black Sea-region. Weather service provider Accuweather said that it expected parts of Russia and Ukraine to get much needed rainfall in the next 48 hours.
Wheat prices soared nearly 14% last week, their biggest weekly gain in 16 years, on the back of concerns over drought-like conditions in Russia.
Russian-based industry group SovEcon downgraded its forecast for Russia’s grain harvest, but not by much, saying it was “too early” to make a comparison with 2010, when drought sent wheat prices soaring worldwide.
Despite the sharp two-day drop, prices are still up nearly 11% since touching a four-month low of USD5.9237 on May 14, supported by a less-optimistic government assessment of the U.S. winter-wheat crop.
Wheat crops conditions in Kansas, the largest U.S. wheat producer, deteriorated this past week by the biggest ratings margin in 4-1/2 years as dry weather continued to grip the state.
Meanwhile, soybeans futures for July delivery traded at USD13.6463 a bushel, dropping 1.25%. It earlier fell by as much as 1.75% to trade at USD13.6113 a bushel, the lowest since March 30.
Soy prices are down nearly 10% since touching a four-year high of USD15.1237 a bushel on May 2, as hedge funds and large institutional investors unwound long positions to secure gains from an impressive 19% rally in the first five months of the year.
Market analysts expect an ever deeper drop heading into the summer, as the soy harvest in South America nears completion and higher prices eventually reduce the amount of Chinese purchases.
Elsewhere on the Chicago Board of Trade, corn futures for July delivery traded at USD5.9900 a bushel, edging up 0.35%. It earlier rose by as much as 0.9% to trade at a session high of USD6.0513 a bushel.
Corn futures regained strength following the previous session’s 5% decline. Prices have been well-supported below the USD6.00-level, amid speculation lower prices would encourage China to boost purchases of U.S. corn.
China’s state-owned grain-stockpiling agency, Sinograin, said last month that it was ready boost purchases to replenish depleted reserves if the prices are attractive.
China is expected to raise its 2012-13 corn imports to 6 million tonnes, up from the 2011-12 estimates of 5.5 million tonnes.
The U.S. produced 38% of the world’s corn last year, making it the both world’s largest corn producing nation and the largest exporter of the grain, while China is the world’s largest consumer of the grain.
Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.
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