U.S. grain and soy futures tumble on broad-based investor selling

U.S. grain and soybean futures tumbled Wednesday, fueled by ongoing fear of a global economic slowdown, seasonal harvest pressure and slumping demand.

The markets were under pressure from a resumption of investment funds liquidating positions in riskier assets, as the uncertain state of the world economy left traders cautious of risk.

Investment funds were featured sellers across broader asset classes, estimated net sellers of 17,000 corn, 12,000 soybean and 4,000 wheat contracts, all large amounts.

The drop in industrial metals, crude oil and subsequently grain futures raised concern about future demand in the face of slowing economic growth.

"The sharp break on Wednesday had a technical element to it, but because it was led by copper futures, I think it also had a China or Asian tone to it as well," said Mike Zuzolo, president Global Commodity Analytics and Consulting.

Long-only index funds may be liquidating even more positions heading into Friday, which is the end of the quarter, with the increasing opinion that China and the rest of Asia are due to slow down economically, Zuzolo said. "If this were to occur, demand would slow as well," Zuzolo added.

Corn, wheat and soybeans also succumbed to pressure from traders trimming risk before Friday's crop inventory and production reports from the U.S. Department of Agriculture.

Seasonal harvest weakness aided the declines in corn and soybean prices, as traders are mindful that large amounts of corn and soybeans will be hauled in from fields in the Midwest in the next few weeks.

The absence of any strong export demand signal, despite prices falling in the past month, was another feature adding to the markets defensive theme, said Bill Nelson, analyst with Doane Advisory Service in St. Louis, MO.

The selloff in wheat "had to be more fund liquidation" because supply-and-demand factors didn't shift dramatically today, said Mike Krueger of The Money Farm. U.S. wheat futures had been drawing support from increasing concerns about dryness hurting crops in key growing areas and expectations for increasing demand following recent declines in prices.

CBOT November soybeans ended down 39 1/2 cents, or 3.1%, to $12.23 1/2 a bushel, a 10-month low. CBOT December corn dropped 21 1/2 cents, or 3.3%, to $6.30 3/4, a two-month low.

CBOT December wheat sank 19 1/2 cents to $6.38 3/4 a bushel, KCBT December wheat lost 26 1/4 cents to $7.26 3/4 and MGEX December wheat dropped 8 cents to $8.61 1/4.

Other Markets

CBOT December soyoil ended up 0.7% at 52.78 cents a pound, and December soymeal finished up 0.1% at $330.50 a short ton. CBOT November rice closed down 7 cents at $16.28 a hundredweight.

CBOT December oats lost 5 cents, or 1.5%, to $3.29 1/2 a bushel. The December ethanol contract dropped 2% to $2.435 per gallon.