U.S. grains: Rallying greenback sparks broad-based selloff

Chicago | Reuters — U.S. grain and soybean futures dropped to their lowest levels in about a week on Thursday as gains in the dollar prompted investors to take profits out of commodities after recent rallies.

Broad-based selling hit the sector as the dollar firmed on expectations that the Federal Reserve could raise U.S. interest rates in the near term.

Commodity funds, which have recently helped drive up grain futures with heavy buying, were net sellers of up to 15,000 contracts of corn, 2,000 contracts of soybeans and 7,000 contracts of wheat at the Chicago Board of Trade, traders said.

Such outside investors will be sidelined until the dollar rally abates, said Rich Feltes, analyst for broker R.J. O’Brien.

“Look for ag markets to stay under pressure,” he advised traders.

The most-active corn contract on the CBOT slid 9-1/2 cents, or 2.3 per cent, to $3.90 a bushel (all figures US$). Wheat gave up 11-1/4 cents, or 2.3 per cent, to $4.68-3/4 a bushel, and soybeans dipped 3-3/4 cents, or 0.3 per cent, to $10.71-1/2 a bushel.

Soybeans fell after the front-month contract on Wednesday touched levels not seen since September 2014, while nearby corn retreated a day after touching its second-highest level since July.

Recent rallies in soybean futures, driven by fund buying and worries about crop damage in South America, are likely to encourage U.S. farmers to plant more of the oilseed this spring. They may also prompt growers to devote additional acreage to corn.

But soybean futures “are beginning to look a bit tired” for now, said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa.

The stronger U.S. dollar makes commodities, traded on a dollar basis, more expensive for buyers holding other currencies. The dollar index, measured against a basket of currencies, hit a near two-month high, furthering its gains from the previous session.

Large global grain supplies added further pressure.

“Wheat bears continue to talk about a glut of cheap feed wheat and how both global and domestic supplies are ridiculously large,” said Kevin Van Trump, chief executive of Missouri agricultural consultancy Farm Direction.

Most-active July soymeal settled up $5.40 at $378.10 per short ton after a seesaw session, rallying to a contract high of $378.50 in the final minutes of trade on technical buying and anticipated tightness due to problems with Argentina’s soy crop.

Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago.

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