by Agrimoney.com
Grain prices recovered some of their losses, as an early tumble blamed on Chinese, European and US economic concerns, which sent wheat and corn down 5% in Chicago, encouraged bargain-hunting.
Wheat for July tumbled 5.1% in Chicago to $6.06 a bushel in opening live deals, its lowest since July last year.
Chicago corn fell more than 5% to drop below the 200-day moving average, a key technical signal, for the first time since August. Soybeans too fell below the 200-day line, for the first time in nearly a year, as they dropped to a three-month low below $13 a bushel.
Grains fell in Europe too, with Paris wheat for November, the best-traded lot, down 4.4% at one stage.
Bad news cocktail
The early declines reflected a move out of risk assets across the board, with shares closing down 1.7% in London and down 0.9% in New York in afternoon deals, thanks to a spate of negative news.
| Crop prices at 18:45 GMT Chicago wheat: $6.44 ¼ a bushel, +0.9% Paris wheat: E195.00 a tonne, -0.8% (closed) London wheat: £164.10 a tonne, +0.1% (closed) Chicago corn: $6.80 ½ a bushel, +0.4% Prices for July contracts on US exchanges, and November lots in Europe |
The dollar, seen a safe haven asset, received an extra boost after Jean-Claude Trichet, the head of the European Central Bank warned that the Greek sovereign debt crisis risked destabilising the eurozone.
The greenback surged 1.0% against a basket of currencies, as of 17:40 GMT, making dollar-denominated assets, including many commodities, less competitive on export markets.
One of these assets, oil, received an extra drag from an International Energy Agency release of 60m barrels from strategic oil stocks held in the main by the US, but also by the likes of Germany and Japan. New York crude fell 4.1% to $91.50 a barrel, with Brent crude tumbling 5.1% to $108.44 a barrel.
Export calculations
However, investors called time on declines., bringing London wheat back just into positive territory. amid further evidence that low prices were luring out buying by end users.
After US ethanol data on Wednesday showed an unexpected recovery in ethanol production, signalling strong use of corn by biofuels plants, Thursday bought American wheat exports which, at 660,000 tonnes beats forecasts.
Furthermore, Egypt unveiled its largest wheat purchase in six months, of 240,000 tonnes, defying expectations that it would come in with a token order.
"I would have thought anyone would wait a few weeks until Russia is back in the market in earnest, when they would be able to get as much as they like for not much," a trader told Agrimoney.com earlier.
'Weather non-threatening'
Nonetheless, the result highlighted the competitiveness needed to win trade with US wheat, at $268 a tonne, bought $38 a tonne cheaper than in Egypt's last tender, announced on Tuesday last week. Cairo bought European wheat at $283.67 a tonne, down nearly $44 a tonne.
Furthermore, weather for crops has improved too. Pierre Begoc, at consultancy Agritel, said that Black Sea crops were "getting much, much better" following recent rains.
"The potential for spring crops is getting better every day," he said, adding that Agritel was "no longer worried" about harvest prospects in Russia and Ukraine, where dryness last month had raised concerns.
Broker US Commodities said that "the weather around the world is non-threatening", with dry areas of China receiving rain, and concerns waning for a dry spell due in the US early next month.
However, Mr Begoc, while saying that the outlook for crop markets did "not look optimistic for the coming days", highlighted potential support for the market from "very tight" corn supplies.
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