Wheat at 11-month lows amid financial contagion
CHICAGO (Reuters) - From corn to wheat to rice, U.S. grains tumbled to multi-month lows on Monday as investors concerned over the economy bailed out as lawmakers jolted markets by rejecting a $700 billion financial rescue plan.
Investors feared that demand for commodities could wane if the global financial crisis slows economic growth, dragging down prices for grains, metals and oil.
There was a sell-off across commodities, with oil settling 9.8 percent lower at $96.37 a barrel.
The stock market took a beating, with the Dow Jones industrial average .DJI down 7 percent, or 777 points, to 10,365. Gold rose $5.90 to $894.40 an ounce on safe haven buying.
Chicago Board of Trade soybean futures fell by their daily trading limit -- trading bands put in place by the exchange to contain volatility in these markets -- to nine-month lows. CBOT wheat futures fell to the lowest level in 13 months.
The global benchmark for grain prices, CBOT futures declines probably will reverberate from Europe to Asia, and could help put a lid on food prices. The United States is the world's largest exporter of corn, soybeans and wheat.
The declines in oil, industrial metals and grain prices pressured the Reuters-Jefferies CRB .CRB index, a global commodities benchmark, down 5.9 percent to 343 points -- below the psychologically bullish 350 level.
CBOT December corn futures settled down 30 cents, or 5.5 percent, at $5.13 a bushel. Corn futures are allowed to move in a 30-cent band either way daily.
November soybeans settled 70 cents, or 6 percent, lower at $10.94 a bushel, closing locked at the 70 cent daily trading band. December wheat fell on 48 cents, or 6.7 percent, at $6.68 a bushel.
CBOT November rice settled down 49 cents, or 2.5 percent, at $19.395 per hundredweight.
"I would say there's a lack of confidence," said grains analyst Don Roose of U.S. Commodities.
"You can't have the dollar up sharply, crude oil down sharply, the government still uncertain with what they are doing and the world credit crunch is expanding," he added.
In a dramatic development, the House of Representatives rejected the Bush administration's $700 billion rescue of the financial markets, which would have allowed the government to buy toxic mortgages at the heart of the financial crisis.
With a majority of Republicans voting against, the House voted 228-205 to reject the measure.
Analysts said that, while fundamentals favored grains like soybeans in the long run due to tight surplus stocks, agricultural commodities would keep feeling pressure from outside markets like oil, equities and metals.
The analysts said demand for grains, particularly from growing economies like China and India, and limited land area to boost supplies, especially in the United States, would give the markets a supportive tone for the coming months.
The exception could be wheat, as global production this year is forecast to increase after weather-related problems slashed output last year in several top exporting nations.
Last month, the U.S. Agriculture Department forecast global wheat production in the 2008/09 marketing year that began June 1 at a record 676.3 million tons.
There could be some fundamental support for grains from the USDA's quarterly stocks report on Tuesday. USDA will also project the size of this year's wheat crop.
Euronext November milling wheat futures settled 5.75 euros, or 3.5 percent, lower at 160 euros a ton.
European maize prices were sharply lower in line with the declines at the CBOT.
(Additional reporting by Miyoung Kim in Seoul, Naveen Thukral in Singapore, Valerie Parent in Paris and Nigel Hunt in London; Editing by David Gregorio)
