Prices slip as Brexit vote stuns investors

By: | Published: June 24, 2016 4:47 PM

Commodity funds were already net sellers of CBOT corn, soybean and wheat contracts and trade sources estimated that funds sold 13,000 corn contracts, 12,000 soybean contracts and 4,000 wheat contracts.

(Reuters)The macro-economic environment is going to be the key driver for all markets including agriculture for a while. (Reuters)

Chicago grain and oilseed futures fell sharply on Friday as they joined a broad retreat in financial markets unnerved by Britain’s vote to leave the European Union. Investors ditched equities and commodities in favour of traditional safe-haven assets like gold and the dollar as they came to terms with the outcome of Thursday’s referendum, which confounded market expectations this week that British voters would opt to stay in the EU.

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 US Midwest and an advancing US wheat harvest.

“The agricultural markets have been caught in the storm on Brexit,” said Luke Mathews, senior risk management consultant at FCStone Australia.

“The macro-economic environment is going to be the key driver for all markets including agriculture for a while.”

The Chicago Board of Trade most-active corn contract fell 2.0 percent to $3.79-1/2 a bushel by 1039 GMT, after hitting its lowest since May 11 at $3.76-3/4 earlier in the session.

The contract has now lost over 13 percent this week after liquidation by investment funds triggered by improving crop weather. Soybeans gave up 1.2 percent to $10.88 a bushel.

Wheat dropped 1.5 percent to $4.47-1/4 a bushel, with individual delivery months setting contract lows. The dollar climbed more than 2 percent 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 0.3 percent to 159.50 euros a tonne while benchmark feed wheat in London added more than 3 percent to 118.80 pounds a tonne, helping by the weakness in the pound and the euro.

“The price reaction so far in grains has been logical given currency movements,” said Alexandre Boy of consultancy Agritel. “But we’ll have to see how Chicago reacts during the US session and then what happens in the coming days. There is a lot of uncertainty because there was so little anticipation of the Brexit outcome.”

On Thursday, commodity funds were already net sellers of CBOT corn, soybean and wheat contracts. Trade sources estimated that funds sold 13,000 corn contracts, 12,000 soybean contracts and 4,000 wheat contracts.

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