Selloff sinks grain futures Tuesday
U.S. grain and soybean futures ended lower Tuesday on broad commodity weakness, as traders were averse to risk amid overbought conditions and a lack fresh export demand.
The declines were driven by a widespread risk-off trade in commodity markets, with declines witnessed across energy and grain futures. The U.S. dollar's climb weighed on grains in general, with traders continuing to take profits after recent gains, helping to extend the losses.
CBOT May corn futures, which is the most-actively traded, ended down 16 cents or 2.4% at $6.45 per bushel.
Soybean futures for May delivery, which is the most-actively traded, closed down 21 1/2 cents, or 1.6%, to $13.45 a bushel.
The corn and soybean markets were the downside leaders, as fund liquidation was featured, analysts at advisory firm AgResource Company said in a market note. "Open interest in CBOT corn and soybeans has skyrocketed since early February and these buyers are now taking profits," AgResource said in the note.
Most of the selling in the markets was deemed technical, as the absence of fresh export news left traders eyeing overbought conditions. The declines accelerated after futures fell below prior session lows. With selling spread across asset classes, index funds were showing signs that they were pulling out of riskier market positions, said Mike Zuzolo, president Global Commodity Analytics and Consulting.
The broad selling encouraged other funds to take profits before the end of the quarter and next week's grain stocks and planting reports from U.S. Department of Agriculture, Zuzolo added.
The weak tone in the market was compounded by renewed concerns about China's economy. Fears that China's growth was slowing raised concerns of declining Chinese imports.
"There has been widespread discussion today on the potential slowing of Southeast Asian economies due to reduced bank funding from Europe and rising energy costs," AgResource stated. "China raised the price of gasoline and diesel by 6-7% to consumers overnight which along with reduced demand from the U.S. and Europe on consumer goods is leading to a worry of curtailed Chinese growth."
Corn and soybean markets have both rallied in recent weeks on current and expected demand from China.
Wheat futures ended lower as well, with ample world supplies and favorable weather conditions for developing U.S. winter wheat adding to the general weakness commodity markets.
CBOT May wheat ended down 9 3/4 cents at $6.42 1/2 per bushel, May KCBT dropped 11 cents to $6.80 1/2 and May MGEX ended down 7 3/4 cents to $7.99 1/4.
-By Andrew Johnson Jr, Dow Jones Newswires; 312-347-4604; Andrew.firstname.lastname@example.org
(END) Dow Jones Newswires
March 20, 2012 16:25 ET (20:25 GMT)
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