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Grains tank on stronger Dollar

10/31/2011 @ 3:43pm

U.S. grain and soybean futures fell Monday, driven lower by broad-based selling across commodities tied to a stronger U.S. dollar.

The U.S. dollar climbed sharply after Japan intervened to strengthen its currency by buying dollars against the yen. That is negative for commodity prices, as a stronger dollar makes U.S. exports less attractive.

The stronger dollar set the stage for lower price action, with renewed worries about Europe's debt crisis also supporting the dollar, and prompting concerns about a global economic downturn that would hurt commodity demand.

Also weighing on the markets was generally lackluster export demand. Traders came into the week with a rather poor export scenario amid sagging interest from foreign buyers reflected in last week's weekly export sales report.

"Traders left last week with a sour demand taste in their mouths," said Mike Zuzolo, president Global Commodity Analytics and Consulting.

There was a lack of market-specific news to buoy prices, with U.S. grain and oilseed exports continuing to lose out to producers from the Black Sea region and South America.

The absence of fresh export demand is a signal that U.S. prices are still overpriced with competitors in other exporting countries.

Meanwhile, added pressure was exerted from the bankruptcy filing for MF Global. Traders were cautious of taking on risk, after the CME Group, the parent company of CBOT, would only allow the brokerage's customers to liquidate positions.

The selling related to MF Global only added to an already bearish scenario, and typically in cases like this, most of the liquidation and transferring of large accounts has taken place prior to Monday's announcement, says John Kleist, senior analyst with ebottrading.com.

"If this were truly a surprise, you have to figure markets would have tumbled sharply, not the quiet orderly declines we have seen today," Kleist said.

CBOT Jan soy end down 8 3/4c at $12.17 1/4/bushel. CBOT December corn finished down 8 cents or 1.2% at $6.47/bushel.

CBOT December wheat fell 16 1/4 cents to $6.28 1/4 a bushel while KCBT December wheat dropped 13 cents to $7.25 and MGEX December wheat declined 11 3/4 cents to 9.08 3/4.

Other Markets

CBOT December soymeal ended down $1.40 at $316.10 per short ton, and December soyoil ended down 0.60 cent at 51.17 cents per pound. CBOT Nov rice ended down 10 cents to $16.64 per hundredweight.

Ethanol for December delivery ended unchanged at $2.640 per gallon. Oats for December delivery lost 1 3/4 cents, or 0.5%, to close at $3.34 1/2 a bushel.

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