U.S. grains: Soy, corn drop on Brexit fallout

(Scott Bauer photo courtesy ARS/USDA)

Chicago | Reuters — U.S. corn and soybeans fell on Friday, caught up in a broad commodity sell-off as investors shed risky assets following Britain’s vote to leave the European Union.

Wheat was mixed, with the front-month Chicago Board of Trade soft red winter wheat contract eking out a small gain on short-covering while deferred contracts, as well as hard red winter wheat and spring wheat, eased.

Most equities and commodities dropped sharply, while traditional safe-haven investments like gold and the dollar rallied as investors came to terms with the surprise outcome of Thursday’s referendum.

“Make no mistake about it: Brexit was a huge change in the macros,” Charlie Sernatinger, global head of grain futures at ED+F Man Capital, said in a note to clients. “It is going to change a lot of hedge fund ideas about the dollar and how to position themselves in commodities.”

Reaction to the British vote added pressure on grains that have been weakened this week by rain relief for corn and soybean crops in the U.S. Midwest.

“The upset of sorts… has the global marketplace in turmoil, with the U.S. dollar spiking and commodities getting killed,” Matt Zeller, director of market information at INTL FCStone, said in a note to clients.

The front-month K.C. hard red winter wheat contract sank to a fresh 10-year low on Friday. Corn extended its losing streak to five days, hitting its lowest since May 10.

CBOT July corn futures ended down 2-3/4 cents a bushel at $3.84-1/2 (all figures US$). CBOT July soft red winter wheat gained 1/2 cent to close at $4.54-3/4 a bushel. Deferred CBOT wheat contracts, as well as K.C. hard red winter wheat and MGEX spring wheat futures also ended in negative territory.

CBOT July soybeans were down 21-1/2 cents at $11.03 a bushel.

For the week, corn was down 12 per cent, its biggest weekly decline in three years. Soybeans were down 5.6 per cent and wheat was down 3.3 per cent.

The dollar climbed two per cent against a basket of currencies, propelled by a plunge in the pound and a sharp drop in the euro, putting pressure on dollar-denominated commodities.

In contrast, spot milling wheat in Paris edged up 0.8 per cent to 160.25 euros a tonne while benchmark feed wheat in London added 4.8 per cent to 120 pounds a tonne, helping by the weakness in the pound and the euro.

— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Naveen Thukral in Singapore and Gus Trompiz in Paris.

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