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Corn tumbles on outside pressure

06/15/2011 @ 4:29pm

CHICAGO (Dow Jones)--U.S. corn futures tumbled under pressure from external markets Wednesday, with falling crude oil and the climbing U.S. dollar attracting selling across commodities in general.

Concerns about the world economy were seen as a negative factor for commodities as fears mounted about Greece.

Traders looked to external markets for direction, as they await updated crop estimates June 30, after farmers aggressively finished plantings last week, said Tim Hannagan, analyst with PFGBest, a brokerage firm in Chicago.

Crude oil is linked to the grains because ethanol is made from corn and funds often trade in a basket of commodities.

The market briefly tumbled the one-day 30 cent limit, to a four-week low, giving back gains that took prices to record highs last week.

Helping drive prices lower were concerns that high prices were reducing demand for the grain. Asian buyers have pulled back on purchases of corn for animal feed in favor of more affordable wheat, while federal data showed U.S. ethanol production dropped last week.

Traders are watching demand closely after prices soared to an all-time high near $8 a bushel Friday. The U.S. Department of Agriculture ignited the rally by projecting strong demand will keep end-of-season inventories at their lowest level since the mid-1990s.

Further pressure was generated from favorable weather conditions that are expected to boost projections for the corn crop after excessive rains stalled planting earlier this spring. The market had a "confluence of influences" weighing on prices throughout the day, said John Kleist, senior analyst with ebottrading.com.

U.S. wheat futures end lower on spillover pressure from the steep fall in corn. Both grains are used for livestock feed. The drop in crude oil added pressure, as it was largely responsible for corn's slide, traders said. Additional selling was linked to the advancing U.S. winter wheat harvest. CBOT July wheat falls 22 3/4 cents to $7.08 1/2 a bushel; KCBT July loses 20 1/2 cents to $8.19 1/4; and MGE July slides 31 1/2 cents to $9.37.

U.S. soybean futures withstood the broader-based selloff in commodities. Traders weren't comfortable taking risk premium out of the market with uncertainty still surrounding the end of the U.S. soy planting season, said Kleist. Additional support was noted from traders unwinding long corn/short soy spreads. CBOT July soybeans end unchanged at $13.68/bushel; November soy finished up 3 cents at $13.66.

Other Markets

CBOT July soymeal end up $1.30 at $360.00/short ton, and July soyoil end up 0.20 cents at 57.05 cents/pound.

U.S. rice futures weaken with the rest of the grains amid pressure from external markets. CBOT July rice drops 13 cents to $14.20 1/2 per hundredweight.

Oat futures dropped with the other grain markets amid pressure from the fall in crude oil and rally in the U.S. dollar. Oats for July delivery settled down 20 cents, or 5.2%, at $3.67 1/2 a bushel. Ethanol futures sank as corn fell to a four-week low. Ethanol for July delivery tumbled 6.3 cents, or 2.3%, to $2.688 a gallon.

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