U.S. corn falls to 4-week low on firm dollar

PARIS/SEOUL (Reuters) - U.S. corn futures fell more than 2 percent to a four-week low on Tuesday, as the dollar rose to a one-year peak following the weekend bailout by the U.S. government of troubled mortgage firms Fannie Mae and Freddie Mac.

September corn futures dropped 2.4 percent to $5.20 a bushel, the lowest since August 13. The fall extended a slide that has persisted since late August as a slowing global economy has boosted the dollar against a basket of currencies, making U.S. grains expensive for overseas buyers.

Soybean and wheat also traded slightly lower, tracking lower corn amid generally favorable weather conditions in the U.S. soy growing Midwest region this week and prospects for bumper global wheat production in 2008.

"The renewed rally in the dollar is a dominating factor moving grains and the commodities markets are likely to be pressured until later this week when U.S. data provides some certainty over crop conditions and output," said a trader at KB Futures.

The U.S. Department of Agriculture is due to report its crop production forecast on Friday and analyst estimates are mixed on whether it will raise or cut its corn estimate.

September soybean dropped 1.88 percent to $11.72 a bushel. Front-month September wheat eased 1.49 percent to $7.12 a bushel.

The Reuters-Jefferies commodities index was showing a seven-month low as investors continued to liquidate positions on a rising dollar and falling crude oil.

At the same time, some analysts said the rescue of the U.S. mortgage lenders could help funds begin to flow more freely in the United States, adding inflationary pressure, a positive factor for commodities as they are often seen as a hedge against inflation.

In Paris, Euronext grain prices also lost ground under pressure from the broader sell-off in commodities, with benchmark wheat futures briefly hitting a 14-month low.

By 1050 GMT, the benchmark November wheat contract was down 2.50 euros or 1.46 percent at 168.50 euros a tonne after reaching a low of 166.50 euros in early trading.

"There is potential for a slight rebound," one French analyst said, stressing 168 euros was a key support level.

European wheat is increasingly competitive on the international market, he added, citing a growing advantage over U.S wheat that has been falling less sharply.

Euronext maize futures were sharply lower, with new crop benchmark January down 3.50 euros or 2.21 percent at 155.00 euros a tonne. The contract hit a low of 153.50 euros a tonne earlier, a level not reached in nearly two years.

Euronext rapeseed futures were also sharply lower, with November down 5.25 euros or 1.41 percent at 367.25 euros a tonne after hitting a nearly 2-year low of 367.00 euros.

(Reporting by Miyoung Kim in Seoul and Valerie Parent in Paris; writing by Gus Trompiz; editing by Jonathan Hopfner and John Stonestreet)