US grain futures slumped as much as 2 percent on Wednesday as the dollar headed for its biggest daily gain in more than a year, weighing on equities and other commodities such as gold and oil. The US Agriculture Department early on Wednesday slashed its forecast for the US corn and soybean yield, with the decline in corn production larger than traders anticipated.
But the European debt crisis overshadowed the USDA crop report as investors sought safe haven in the greenback after Italian bond yields climbed to levels deemed unsustainable for the eurozone's largest government bond market. "Today's market is not about the government crop report, it's about Italy, the euro and the dollar," said Glenn Hollander of Chicago cash merchant Hollander-Feuerhaken.
Corn futures for December delivery fell as much as 2 percent in early trading at the Chicago Board of Trade. Futures briefly turned higher before settling 4-1/2 cents lower at $6.56 per bushel. "The corn numbers were a little friendly with the yield being down, but they also cut the demand," said Paul Haugens, vice president for Newedge USA. CBOT December wheat plunged 2 percent, ending 14 cents lower at $6.43 in the first decline in five trading sessions, while hard red winter wheat futures at the Kansas City Board of Trade fell more than 3 percent.
CBOT January soybeans finished 19-1/2 cents lower at $11.85-1/2 per bushel, a drop of 1.6 percent. A large Brazilian soy crop would help the South American nation overtake the United States as the top global soy exporter, according to USDA data. The USDA in its monthly supply and demand report pegged the US corn crop yield at 146.7 bushels per acre, below trade estimates for 147.7 bushels, and below the 148.1 bushels forecast last month. If realised, it would be the lowest corn yield since 2003's 142.2 bpa. The department estimated 2011/12 US corn ending stocks at 843 million bushels, above estimates for 795 million bushels.
"We're at lofty (price) levels already, and the ending stocks are adequate at 843 million (bushels), so what's the demand going to look like? The outside markets, with the problems in Europe, the dollar is extremely firm, and I think that's going to anchor this market as we have kind of a risk-off type trade," said Don Roose, analyst at US Commodities. USDA estimated the US soybean crop yield at 41.3 bushels per acre, compared with trade estimates for 41.4 bushels, and below the USDA's 41.5 bushels forecast last month.