NEWS - Financial Markets
Published 4:23 AM, 26 Nov 2009
Last update 0:23 AM, 26 Nov 2009
US corn, wheat bounce on low US dollar
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By Naveen Thukral and Gus Trompiz of Reuters
SINGAPORE/PARIS - Chicago corn and wheat futures bounced as a fresh low for the dollar fuelled buying of commodities, while soybeans extended gains on strong global demand.
The slide in the dollar to its lowest level since early August 2008 against a basket of currencies helped corn break out of a six-day falling sequence and wheat recoup part of its 4 per cent losses in the previous session.
Operators said they would be watching to see if the dollar tested other levels after it also sank to a low against the euro since August last year at $US1.5081.
"We'll be watching exchange rates closely with a lot of US data due to come out," a European futures broker said, citing reports on consumer confidence, home sales and jobless claims. "This could produce movements on commodity markets."
A weaker dollar tends to support prices of commodities denominated in the US currency because they become cheaper on the world market.
US corn and wheat were also being supported by short-covering for ahead of Thursday's US Thanksgiving holiday, operators said.
"The US will be in holiday mood, so basically position squaring is the main feature for all commodities," the head of the proprietary fund management team at Sumitomo Corp in Tokyo, Genichiro Higaki said.
Egypt wheat tender
Chicago Board of Trade corn for December delivery rose 1.99 per cent to $US3.83-1/2 a bushel by 1204 GMT. December wheat rose 2.39 per cent to $US5.45-3/4.
Corn lost 6.5 per cent in the last six sessions as the market was weighed down by expectations of a near-record US production amid thin demand for the feed grain.
Corn had also come under pressure after the CME Group said on Tuesday it would not limit the level of vomitoxin in Chicago Board of Trade corn deliveries as it had earlier announced.
The move was viewed as bearish to the corn market because of concerns that US supplies would be seen as low quality. Vomitoxin is found in mouldy corn and can sicken livestock.
CBOT wheat recovered partially from a 4.4 per cent slide in the previous session - the front-month contract's biggest one-day drop since October 27.
Heavy fund buying pushed wheat prices higher during the past few weeks, but some traders said the flow of new money was easing, putting wheat under pressure from large global supplies.
"It does not appear as though the fundamental picture has changed for the wheat market; perhaps last night's falls were simply a reflection that the CBOT futures market was overvalued," said Commonwealth Bank of Australia in a report.
Despite Tuesday's pullback, US wheat is still seen as too expensive to win business from Egypt, which is holding another international tender.
But the outcome of the sale was again seen as hard to call in the light of ongoing changes to Egypt's tender terms.
In Europe, milling wheat futures in Paris were firm in line with CBOT, with the January contract up 0.57 per cent at 132.50 euros a tonne but staying within its recent range between 130 and 135 euros.
On the soy market, CBOT January soybeans gained 0.79 per cent to $US10.54-1/4 a bushel to continue their upward trend on strong buying and wet-weather delays in plantings in Brazil.
Demand from China, the world's top buyer of soybeans, was boosting soy prices and the market expects the country to retain its huge appetite for soy imports next year.
Oilseeds analysts at Oil World in Hamburg, Germany, said on Tuesday US soybean exports were likely to remain high during 2010, although the South American crop early next year would be the key to price levels.