Chicago grain prices slump as stronger dollar erodes appeal

Chicago grain prices on Tuesday suffered a sharp drop as a stronger dollar eroded appeal of grain commodities on the international market. Besides, China's stance to cool inflation also helped weigh on the market.

The most active corn contract for December delivery shed 29 cents, or 5.2 percent, to 6.2615 U.S. dollars per bushel. December wheat lost 46.5 cents, or 6.5 percent, to 7.125 dollars per bushel. January soybean declined 66.75 cents, or 5.2 percent, to 12.1975 dollars per bushel.

The dollar index Tuesday advanced for a second straight day, rising as much as 1.2 percent against a basket of six major currencies, amid uncertainties over EU aid to Ireland to solve its debt problem. The index has gained four percent since the prior week.

An expensive dollar could reduce the appeal of commodities priced in dollar for investors holding other currencies.

Besides, China Tuesday announced that the central government is drafting measures to counter the fastest inflation in two years, which also placed more pressure on the market.

A trader noted that although China has not specified the measures in cooling inflation, most investors opt to liquidate commodity long positions and wait and see what happens in China.

As a result, corn tumbled to a five-week low in Chicago and soybeans dropped 5.2 percent from the prior trading day.

Aside from above negative forces, the wheat market, which dropped the most in three months, was also affected by wet weather in the U.S., which is expected to development of winter wheat crops.

Parts of the Great Plains got as much as 2.5 inches (6.4 centimeters) of rain last week, which improving crops prospect. Some of the fields received less than half the normal amount in the past month.

Source: Xinhua