U.S. grain and soybean futures tumbled Thursday in a broad selloff of commodities, with futures dropping to six-week lows as investors reduced risk exposure, reflective of slumping energy and metal futures, and a rise in the U.S. dollar.
Selling overwhelmed the markets, with the broader-based commodity selling overshadowing supportive crop concerns, analysts said. The plunge in prices was tied to the selloff in financial markets, with investors selling long commodity/short dollar positions that had propelled corn, wheat and soybeans last month, analysts said.
A rapid rise in the U.S. dollar Thursday weighed on prices, as a stronger dollar raises the cost of basic goods for buyers using other currencies. After driving commodity prices higher for much of 2011 on worries about supply shortages, investors now fear that high prices will lower consumption.
The price increases in commodities raise concerns of slowing demand in food and energy, a feature starting to show up in earnings reports at companies like Archer Daniels Midland, said Mike Zuzolo, president Global Commodity Analytics and Consulting in Lafayette, Ind.
Food companies face trouble as price increases hit grocery store shelves, with companies passing on higher costs to consumers reflected in a 3% rise in retail prices for processed food, Zuzolo said.
Meanwhile, the U.S. Department of Agriculture reported weekly export sales Thursday that were "poor across the board," said Don Roose, president of U.S. Commodities in Des Moines, Iowa. The sales, below analyst expectations for corn, soybeans and wheat, are a sign that buyers are balking at historically high prices, analysts said.
Weekly export sales for soybeans were only a net 21,200 metric tons for the week ended April 28, with 21,000 tons for delivery in the 2010-11 marketing year that ends Aug. 31. Total corn sales for the week ended April 28 were 284,200 metric tons for delivery before the end of the crop's marketing year, down 19% from the previous week and 53% from the prior four-week average.
U.S. soybean futures retreated for the fourth consecutive day, succumbing to the broad-based selling across commodity markets. The theme of large investors reducing risk in commodities kept pressure on prices, with slower export demand and the threat of some intended planted corn acres shifting to soybeans aiding the lower theme, analysts said. Soybeans for July delivery dropped 30 1/4 cents, or 2.2%, to $13.21 3/4 a bushel.
U.S. corn futures ended lower, unable to buck the broader commodity trend, despite ongoing supply worries and a sluggish start to the planting season. The market was also pressured by slowing export demand, a potential sign that high prices may be reducing demand for corn. Corn for July delivery, the most actively traded contract, ended down 20 3/4 cents, or 2.8%, at $7.08 3/4 a bushel. The New crop December contract dropped 9 1/2 cents or 1.4% to $6.55 3/4.
U.S. wheat was swept up in the broader-based commodity selloff, as traders concerned about slower consumption amid economic worries weighed on prices, analysts say.
Wheat for July delivery ended down 18 cents, or 2.3%, at $7.54 a bushel at Chicago Board Of Trade. At the Kansas City Board of Trade, hard red winter wheat for July delivery dropped 2.4% to $8.57 a bushel. Hard red spring wheat for July delivery closed down 2.2% at $8.95 1/2 a bushel at the MGEX in Minneapolis.
CBOT July soyoil settled 2.5% lower at 55.73 cent/pound and July soymeal ended 1.4% lower at $347.50/short ton. U.S. rough rice futures closed limit down for the second consecutive day, with the July contract tumbling 5% to $14.14/hundredweight. Broad-based liquidation of commodities pressured the market despite issues for crops in Texas and planting concerns in the Delta, analysts say.
U.S. oat futures stumbled Thursday, retreating with other commodity markets, despite concerns about planting delays in the northern plains. Oats for July delivery settled 12 cents, or 3.5%, lower at $3.34 a bushel. Ethanol futures dropped in unison with corn and crude oil futures. July ethanol ended down 2.3% at $2.578 a gallon.