Soybean futures fell, capping the biggest weekly decline since early October, and corn prices slipped as moves by China to slow its economy threaten to curb demand for imported food and animal feed.
China ordered its banks to set aside larger reserves for the fifth time this year, draining cash from the financial system to limit inflation. The Asian country is the biggest consumer of soybeans and the second-largest user of corn after the U.S. Both commodities surged earlier this month to the highest prices in two years as growth accelerated in China.
“Concern that the increase in reserves will be followed by higher Chinese interest rates has encouraged selling,” said Shawn McCambridge, the senior grain analyst for Prudential Bache Commodities LLC in Chicago. “People just want to get out of positions before the weekend.”
Soybean futures for January delivery fell 40.5 cents, or 3.3 percent, to close at $12.015 a bushel at 1:15 p.m. on the Chicago Board of Trade. The most-active futures dropped 5.3 percent for the week, the most since Oct. 1.
Corn futures for March delivery fell 21 cents, or 3.8 percent, to $5.3475 a bushel in Chicago, capping a weekly drop of 2.4 percent after plunging 8.9 percent last week.
On Nov. 9, corn reached a 26-month high of $6.175 after the U.S. Department of Agriculture said adverse weather reduced the size of the domestic crop, the world’s largest. Soybeans touched $13.485 on Nov. 12, the highest since August 2009, as Chinese demand surged.
China’s plans to attack inflation with subsidies, sales of food reserves and the threat of price controls probably will be insufficient, and the central bank will have to raise interest rates, according to a Bloomberg News survey of economists.
Food demand is rising in the country, the world’s biggest consumer, according to the United Soybean Board, which represents U.S. farmers and funds industry marketing and research.
“Their demand for food is going to be so great” that processors will continue buying soybeans, Philip Bradshaw, the group’s chairman, said after a seminar with South Korean clients in Seoul. “They will import more this year,” Bradshaw said in an interview.
Prices also fell as rain improved prospects for crops in South America, where soil moisture had been depleted by dry weather earlier this year, Prudential’s McCambridge said.
Parts of Brazil got as much as 3 inches (7.6 centimeters) of rain in the past 24 hours and most of the growing region will have showers every few days during the next two weeks, World Weather Inc. said in a report today. Some fields in Argentina got as much as 0.8 inch of rain the past 24 hours with more expected in the next week, the private forecaster said.
“The biggest share of the growing region in South America has adequate moisture for crop development the next few weeks,” McCambridge said. “The dry areas are shrinking.”
Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government data show.