U.S. wheat and soybeans sank to their lowest prices in more than a year Wednesday as a downturn in China's manufacturing sector renewed global economic concerns.
Wheat settled at its lowest level in 16 months at the Chicago Board of Trade, while soybeans dropped to a 13-month low. Corn slid to a seven-week low.
Losses accelerated toward the close of trading, particularly in the soy complex, as traders reduced risk ahead of the Thanksgiving holiday on Thursday, traders said. U.S. grain futures markets will be closed for the holiday.
"You just had follow-through selling," said Mike Krueger, president of The Money Farm.
Strength in the U.S. dollar and widespread losses in commodities and equities added pressure to the grains. Oil tumbled 1.6 per cent while the stock market fell 1.7 per cent.
"It's a big risk-off trade across the board," said Dax Wedemeyer, broker at U.S. Commodities.
December wheat fell 2.5 per cent, or 14-3/4 cents, to $5.79-1/4 per bushel. January soybeans shed 2.7 per cent, or 30-1/2 cents, to $11.22-1/2 per bushel.
December corn slipped 1.7 per cent, or 10-1/4 cents, to $5.88-3/4 per bushel.
Spring wheat futures continued to feel heavy pressure from profit-taking, posting their biggest two-day loss since February. Spring wheat for December delivery slid 2.9 per cent, or 24-1/2 cents, to a two-month low of $8.35-3/4 a bushel at MGEX.
Despite the slide in prices, there was no evidence foreign buyers were stepping up to increase purchases. Traders have been focusing on demand because the U.S. corn and soybean harvests are finished.
"There's nothing moving on the export front to indicate that the end users view this as a buying opportunity," said Bryce Knorr, analyst for Farm Futures.
Investors liquidated long positions after a preliminary PMI survey showed China's factory sector shrank the most in 32 months in November, reviving worries the country may be slipping toward a hard landing.
China's economic outlook has a strong impact on grain prices because it is the world's top importer of soybeans and a significant buyer of U.S. corn.
Traders have been on edge recently waiting to see whether China will ramp up its purchases of corn with prices slipping below $6 per bushel. China's last major purchase of U.S. corn was when prices fell below that.
"I think the ball is in the Chinese court" to give the markets direction, said Sid Love, analyst for Kropf & Love Consulting.
Fears about a global slowdown have unnerved the grain markets lately as traders worry it would dent demand for commodities.
A disappointing German bond sale added to concerns as it stoked fears the European debt crisis was threatening the continent's biggest economy. It was one of Germany's worst bond sales since the launch of the euro.
The markets lack fresh demand from end users to support prices in the face of economic jitters. Users are waiting to make purchases until they see whether prices continue to decline, analysts said.
The U.S. Department of Agriculture will issue its weekly report on export sales on Friday, one day later than usual due to Thursday's holiday.
"No one's looking for anything too snazzy," Krueger said.
Traders were reluctant to take on new risk ahead of the holiday. The CBOT will be closed Thursday and trade an abbreviated session Friday.
The markets could see a rebound when trading resumes Friday, Krueger said. He predicted traders will do "some short-covering, unless we get another round of horrible news out of Europe." (Additional reporting by Michael Hogan in Hamburg and Jane Lee in Kuala Lumpur)