Prices for Corn, Soybeans Fall Sharply on Fear of Rate Hike

May 19, 2016 04:07 PM

Corn and soybean prices fell sharply Thursday, as an expected U.S. interest rate hike and a favorable NOAA forecast pushed big fund players to sell.

Analysts said the steep drop in prices, with July soybeans falling more than 20 cents and then recovering to finally close at $10.71, and July corn slipping more than 9 cents to close at $ 3.90 were driven by big fund players cashing out of long positions on fear that the U.S. Federal Reserve could raise interest rates next month.

“It was a bad day for grain prices,” said Ted Seifried, of Zaner Ag Hedge in Chicago. “Commodities were under pressure today.” The dollar index also was near a two-month high, analysts noted.

A lot of money in the market is using grain as a hedge against inflation, and if interest rates go up, inflation goes down, Seifried explained.

Grains were also under pressure because of a non-threatening weather report released by NOAA and lower-than-forecast exports of new soybean crop that  “continues to disappoint,” Seifried said.

But it’s too soon to tell if this could mean the end of the rally, according to analysts.

Friday “will be a very important day to see the (market) reaction,” said DuWayne Bosse, of Bolt Marketing in Britton, S.D. “Soybeans may have topped, but the corn chart looks good to see a rebound.”

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