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Soybeans trampled as investors flee to safety

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Soybeans took their turn on the chopping block, going limit down at one point, while wheat hit a year low after a weak opening by Wall Street shares sapped investors' enthusiasm for commodities too.

Early gains by oil and other commodities – including Chicago crops – crumbled as investors continued a flight back to safety in the face of last week's poor US unemployment data.

"Consumer confidence is weighed down by higher retail prices and rising unemployment and so the number of Americans taking to the road over the [Independence Day] holiday weekend was probably lower than last year," Harry Tchilinguirian, senior oil analyst at BNP Paribas, said.

The prospect of the US second-quarter earnings season rattled some cages too.

Shares and oil drop

That was all good news for the dollar, and indeed Treasury bonds, which have become favoured refuges for jittery investors.

However, it was bad for shares, with the Dow Jones industrial average down 1.2% at 16:30 GMT, and commodities, which suffered from the stronger dollar as well as declining hopes of economic recovery.

Dollar-denominated commodities look more expensive to foreign buyers when the greenback appreciates.

New York crude for August dropped 2.0% to $62.78 a barrel.

'Bullish surprise'

In Chicago, investors had their knives out for soybeans in particular.

It was not immediately clear why, although the decline fed on itself through the triggering of "stop" - automatic sell triggers put in place by investors to limit their losses.

Last night's US Department of Agriculture report, showing surprise deteriorations in the quality of US crops, had appeared a "bullish surprise for the market", Vic Lespinasse, at GrainAnalyst.com, said before live trading opened.

However, soybeans may have been singled out because they have proved the most robust of main crops so far, and thus the most prone to profit-taking.

Even a 76.5 cent – or 6.4% - plunge to $11.24 a bushel for July soybeans left them at their lowest for seven weeks, a less severe record than for other crops.

'Overriding bearish influence'

Wheat's apparently modest decline of 5.75 cents to $4.87 ¼ a bushel earlier took it to the lowest for a nearest contract since December 12.

The contract recovered to $4.90 a bushel by 16:30 GMT, down 3 cents on the day.

While July corn was 5.25 cents higher at $3.48 ½ a bushel, it remained within 3% of its own year low.

Indeed, prices may have got so low that bargain hunting was creeping in.

"Wheat and corn would like to trade higher and frequently have been able to do just that today, at least for small gains," Mr Lespinasse said.

"But the overriding bearish influence of the beans continues to prevent them from advancing very far."

By Mike Verdin

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