Corn, Soybeans Fall as Dollar Gain Erodes Investment Appeal of Commodities

Corn futures fell for a fourth straight session and soybeans dropped for a second day on speculation that a stronger dollar will erode demand for commodities.

The dollar rose against 8 of 16 major currencies as a drop in U.S. output damped demand for riskier assets. Corn prices have gained 34 percent this year and soybeans rose 14 percent as adverse weather damaged U.S. crops. Hedge funds increased their bets on a corn rally by 2.3 percent to 410,439 contracts in the week ended Oct. 12.

“The reversal in the dollar likely means a period of backing and filling after the recent surge in prices,” said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana. “It’s not a sign that the rally in corn or soybeans is over, but it has encouraged some profit-taking on the risk trade that has benefited commodities.”

Corn futures for December delivery fell 5.75 cents, or 1 percent, to close at $5.5725 a bushel at 1:15 p.m. on the Chicago Board of Trade, the first four-day slump since Sept. 23. On Oct. 13, the price reached $5.88, the highest level since August 2008.

Soybean futures for January delivery fell 0.75 cent, or 0.1 percent, to close at $11.95 a bushel in Chicago. On Oct. 15, the price reached $12.145, the highest level for a most-active contract since June 5, 2009.

Dry weather in the U.S. Midwest this week will allow farmers to accelerate harvesting that already is taking place at a record pace, Gerlach said.

Harvest Estimates

Corn collection may be 65 percent completed as of yesterday, up from 51 percent a week earlier, and soybean harvesting may reach 85 percent, up from 67 percent on Oct. 10, Gerlach said. The U.S. department of Agriculture is scheduled to update its harvest reports later today.

U.S. corn output will fall 3.4 percent from a year earlier, reducing reserve inventories before the 2011 harvest to the lowest level since 1997, the USDA said on Oct. 8. Yield estimates were cut 6.7 bushels an acre to 155.8 bushels from a month earlier. Last week, prices jumped 13 percent, the most since December 2008.

“The path of least resistance is lower with harvesting moving ahead,” Gerlach said. “We are at the peak of the harvest supplies” moving into the cash grain markets, Gerlach said.

The U.S. is the world’s biggest grower and exporter of both crops. Corn is the largest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government figures show.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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