U.S. grains plunged on Tuesday, with wheat falling the most in six months, as investors bailed out of the market to reduce risk amid growing upheaval in Libya and geopolitical concerns in the Middle East and North Africa.
The widespread sell-off sent wheat, corn, soybeans, rice and oats tumbling by the maximum daily trading limit as investors shifted money out of grains to other assets amid escalating geopolitical concerns in the Middle East and North Africa.
"It's a move to get risk off the table. Anytime a leader sends military planes against their people it's bound to cause a panic," said Roy Huckabay, an analyst for The Linn Group.
Wheat broke chart support at several levels on the way down, including key support at its 100-day moving average of $7.67-3/4 per bushel.
Investor funds had been buying each market since late 2010, leaving a bloated number of long positions as each market had soared to 2-1/2 year highs earlier in the year.
Corn rallied to a fresh 31-month high in overnight Globex trade then plunged over 44 cents per bushel or 6 percent to a two-week low of $6.79-3/4.
A revolt against the 41-year rule of Libya's leader Moammar Gadhafi turned violent as government forces brutally attacked protesters, leading to a major global shift of money into gold and crude oil and away from equities and grains.
"This reversal sets up a pretty ugly top on charts and there's talk of liquidation and sell-stops. I'm concerned now at how tight the exit doors can get," Huckabay said.
Chicago Board of Trade wheat for March delivery fell the daily limit of 60 cents to $7.62-1/4 a bushel by 12:56 p.m. CST (1856 GMT) to a five-week low.
March soybeans were down the 70-cent limit at $12.98 at a two-month low and posted its biggest percentage drop in three months. March corn was down the daily limit of 30 cents per bushel to $6.79-3/4 and also posted its biggest drop since mid-November. Volumes were heavy due to U.S. markets being closed on Monday for Presidents Day and pent-up demand to liquidate grains.
Crude oil hit a 2-1/2 year high as fighting in Libya, the latest flashpoint in the spreading turmoil in the Middle East and North Africa, added to investor worries that oil supplies from those regions may be disrupted.
UPCOMING USDA FORECASTS WEIGHS ON GRAINS
But grains crumbled as investors sold long holdings in liquidation during the upheaval and ahead of the anticipated release late this week of huge U.S. crop acreage forecasts from the U.S. Department of Agriculture during its annual outlook forum in Washington D.C.
USDA last week pegged this year's corn acreage at 92.0 million, the second largest area since 1944.
EU wheat prices also fell with benchmark Paris May down 14.25 euros per tonne (metric ton) or 5.64 percent at 242.75 euros.
The soybean market found added pressure from better-than-expected
crop outlook in Argentina and a slowdown in demand from China.
The Argentine government is more upbeat about the country's soy output following recent rains, and sees 2010/11 soy output at above 50 million tonnes, Agriculture Deputy Secretary Oscar Solis said on Friday.
Argentina is the world's third largest soybean exporter and the largest exporter of soymeal and soyoil.
Prospects for a record soybean crop this year in Brazil, the second largest soy exporter after the United States, also added pressure to soybean futures.
Analysts Agroconsult said on Tuesday that Brazil's soy crop would be a record 72.0 million tonnes, up from the 70.3 million tonnes forecast in January.
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