CHICAGO (Dow Jones)--A stronger U.S. dollar and worries about the global economy fueled investor selling interest, pressuring U.S. grain and soybean prices Monday.
The losses were fueled by investors reducing exposure in riskier commodity markets, with a stronger U.S. dollar attracting broader based selling in grain futures. Investors exiting riskier assets such as commodities to the safety of the U.S. currency weighed on dollar-denominated raw-material markets.
Traders were nervous about the length of fund positions in the market, particularly with a tenuous global economy. The combination of European debt issues and harvest pressure were enough to encourage money managers to continue trimming long positions from the market that began last week after worries about U.S. crops eased.
"Strength in the U.S. dollar fueled concerns about weakening export demand," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.
The higher dollar stiffens competition for U.S. exports and, even with a significant break in prices, U.S. soybeans and wheat are less attractive in world export markets, Zuzolo said.
U.S. wheat faces stiff competition for exports from countries in the Black Sea region such as Russia, and soybeans are competing with Brazil, where China is sourcing supplies longer than expected.
Meanwhile, corn futures managed to pare losses in late trading, drawing support from unconfirmed rumors that China was looking to source corn from the U.S. or Argentina, Zuzolo said. This helped stanch the market's recent bleeding, with traders adding that, even with recent anecdotal reports of better-than-expected yields, supplies will remain tight in 2012.
Looking ahead, "wheat has the potential for a recovery after sinking to multi-month lows, with worries about the U.S. spring wheat crop in the northern Plains and dryness issues hampering hard red winter wheat plantings in the southern plains as supportive factors," Zuzolo said.
Otherwise, traders will continue to keep a close eye on external financial markets, as global economic fear limits investor buying interest.
CBOT November soybeans dropped 19 1/2 cents, or 1.4%, to $13.36 a bushel. CBOT December corn ended up 1/4 of a cent to $6.92 1/4 a bushel.
CBOT December wheat slid 15 1/4 cents to $6.73 a bushel while KCBT December shed 16 cents to $7.68 and MGEX December stumbled 14 1/2 cents to $8.41 3/4.
CBOT December soymeal end down 1.3% at $348.50 per short ton, and December soyoil dropped 1.8% to 55.84 cents per pound. CBOT November rice closed down 2.8%, or 50 cent, the daily trading limit, to $17.39 a bushel.
Ethanol for December delivery dropped 0.6% to $2.551 per gallon. Oats for December delivery ended unchanged at $3.45 1/2 per bushel.