Corn, Soybeans Slump in Chicago as China Moves to Slow Economy, Inflation

Corn tumbled to a five-week low in Chicago and soybeans dropped 5.2 percent on concern that China will curb commodity speculation and limit inflation, reducing demand for imported crops.

Premier Wen Jiabao said today that the cabinet is drafting measures to counter the fastest inflation in two years. China may impose price limits on food and toughen punishment for those found speculating on agriculture futures, the China Securities Journal said, citing an unidentified person. The country, the world’s top oilseed buyer, has boosted corn imports this year.

“Fears of China cracking down on inflation, without giving any specifics, will keep pressure on the markets,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “People are getting to the point in the year where they may be willing to liquidate commodity long positions and wait and see what happens in China.”

Corn futures for March delivery fell 29 cents, or 5.1 percent, to close at $5.40 a bushel at 1:15 p.m. on the Chicago Board of Trade. Earlier, the price declined by the exchange limit of 30 cents to $5.39, the lowest for a most-active contract since Oct. 8.

On Nov. 9, corn reached a 26-month high of $6.175 after adverse weather reduced the size of the U.S. crop.

Soybean futures for January delivery fell 66.75 cents to $12.1975 a bushel. Earlier, the oilseed fell by the exchange limit of 70 cents to $12.165, the lowest since Oct. 27. The commodity plunged 5.2 percent on Nov. 12 after reaching $13.485, the highest price since Aug. 28, 2008.

2008 Price Freeze

In January 2008, China temporarily froze prices for oil products, natural gas and electricity to counter inflation that surged by the fastest pace in more than a decade.

Corn and soybeans also fell on forecasts for rain in the next two weeks in Argentina and Brazil, the biggest exporters behind the U.S., Roose said.

Fields in parts of both countries will get as much as 4 inches (10.1 centimeters), boosting development of newly planted crops, Allen Motew, a meteorologist at QT Weather in Chicago, said in a report.

“The South American forecasts are wetter, and that will drive prices lower,” Roose of U.S. Commodities said. “The markets will need to find out if demand rebounds at the lower prices.”

Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government data 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