U.S. grain and soybean futures sank on Monday, with corn dropping to a six-week low under $6 a bushel as increasing concerns about the euro zone debt crisis encouraged traders to reduce risk.
The potential failure of a U.S. debt reduction plan added to concerns about the economy, clouding the outlook for a rebound in commodity demand. The U.S. congressional ``super committee'' was expected to formally announce its three-month attempt to forge a $1.2 trillion deficit reduction plan had failed.
“The problems in Europe combined with the inability of the super committee to come to any agreement have brought selling into nearly every market,” said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa.
Chicago Board of Trade (CBOT) corn for December delivery fell for the fourth straight session losing 1.8 percent, or 10.75 cents, to $5.99 1/2 per bushel as of 12:21 p.m. CST (1821 GMT).
December wheat tumbled 1 percent to $5.92 1/2 per bushel, or 5-3/4 cents, after falling 3.3 percent last week because of euro zone concerns and abundant global supplies.
Most-active January soybeans lost 1.5 percent, or 17.75 cents, to $11.50 1/2 per bushel.
Prices fell as fears about Italy and other debt-strapped euro zone countries persisted, with Moody's warning about France's rating outlook and Spanish yields rising a day after the country voted in a new government. Traders worry a global economic slowdown will dent demand for commodities, including farm products.
“The constant drumbeat of bad news out of Europe makes it hard for anyone to get overly optimistic about any of the markets,” Pfitzenmaier said.
U.S. grains attracted additional pressure from export demand that's been hurt by increased competition from Black Sea countries offering less-expensive grain.
Over the weekend, Egypt, the world's top wheat buyer, said it bought 240,000 tonnes of Russian, Ukrainian or Kazakh wheat and none from the United States.
Weekly grain export inspections also fell short of expectations. The U.S. Department of Agriculture said 11.597 million bushels of wheat were inspected, below estimates for 12 million to 16 million, and 40.762 million bushels of soybeans were inspected, below estimates for 45 million to 50 million. Corn was a bright spot, with inspections topping estimates.
“The demand side of the market is softer than the trade would hope,” said Tim Hannagan, analyst for PFG Best, a brokerage in Chicago.
MF GLOBAL ADDS CONCERN
Traders also reacted to news the apparent ``shortfall'' of customer funds from bankrupt broker MF Global Holdings Ltd's may be around $1.2 billion, roughly double initial estimates from regulators.
Some traders, who had accounts with MF Global, have been unable to trade because their money has been frozen. Others have stepped back from the markets due to concerns segregated funds were not protected.
The latest development “creates more uncertainty and more uneasiness about the markets,” said Brian Hoops, president of Midwest Market Solutions, a brokerage in South Dakota.
Monday's selling represented a continuation of ongoing fund liquidation in grains. Weekly data from the main U.S. futures regulator on Friday showed funds continued to pare their net long position in CBOT corn and shifted to a net short position in soybeans for the first time in 16 months.
The Commodity Future Trading Commission's weekly Commitments of Traders report also showed that funds increased their net short position in CBOT wheat.
(Additional reporting by Jane Lee in Kuala Lumpur and Svetlana Kovalyova in Milan; editing by Bob Burgdorfer)