Chicago | Reuters—Chicago Board of Trade wheat futures fell sharply on Wednesday, dropping to lows not seen since August, as the U.S. dollar surged after data showing U.S. inflation for October increased in line with expectations, which could result in fewer interest rate cuts.
Corn and soybean futures also eased as disappointment over a debt package aimed at bolstering China’s economy stoked fears about demand from the major global buyer.
The most-active wheat contract on the Chicago Board of Trade Wv1 fell 11-1/4 cents to settle at $5.41 per bushel after falling to its lowest level since Aug. 29.
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A rally in the dollar, which touched a one-year high during the session, fueled the precipitous fall of wheat futures, said Mike Zuzolo, president of Global Commodity Analytics.
“The very strong attachment to new highs in the dollar index, especially when the Russian ruble is also weakening against the dollar, that generates fresh lows in the wheat market especially,” said Zuzolo.
U.S. consumer price data released on Wednesday fueled expectations for fewer interest rate cuts next year, propelling further strengthening of the greenback.
A stronger dollar tends to make U.S. crops less attractive to overseas buyers holding other currencies. A weaker ruble would boost demand for wheat from Russia, the world’s top exporter.
The U.S. Department of Agriculture reported on Tuesday that the condition of U.S. winter wheat was improving as much-needed moisture hit the Plains, easing worries about production potential in the world’s No. 5 exporter of the food grain.
—Additional reporting by Nigel Hunt in London and Peter Hobson in Canberra
