Soybeans, Corn Drop as Dollar Rally, Record Crops Curb Demand

Jan. 20 (Bloomberg) -- Soybeans fell to a three-month low and corn extended the longest slump since 2005 as the rising dollar reduced investment demand for commodities to hedge against inflation.

The dollar rose the most in more than six weeks against a basket of six major currencies on concern that the global recovery will slow as China took steps to tighten credit. World soybean output is forecast to surge 20 percent to a record this year, and corn production may be the highest ever, the U.S. Department of Agriculture said last week.

“The stronger dollar and a growing global supply situation are the main negative factors,” said Greg Wagner, the senior market analyst for AgResource Co. in Chicago. “We have flipped the market attitude from buying dips to selling rallies.”

Soybean futures for March delivery dropped 13.5 cents, or 1.4 percent, to $9.50 a bushel on the Chicago Board of trade, the fourth straight decline. The price earlier touched $9.4075, the lowest level for the most-active contract since Oct. 9.

Soybeans have declined 9.4 percent this month as rain increased yield potential in Brazil and Argentina, the two biggest producers and exporters after the U.S.

Corn futures for March delivery fell 1.25 cents, or 0.3 percent, to $3.68 a bushel in Chicago, after touching $3.6225, the lowest price since Nov. 2. The most-active contract dropped for a seventh straight session, the longest slump since September 2005.

Corn has fallen 11 percent this month, dropping after the government said on Jan. 12 that farmers produced record crops last year.

Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, followed by soybeans at $27.4 billion, government figures show. The U.S. is the world’s biggest producer and exporter of both.