U.S. corn futures fell 2.4% to their lowest level in 3-1/2 years on Wednesday, with falling prices for crude oil cutting into demand from the ethanol market, traders said.
A crumbling cash market for corn added to the pressure in the futures contracts as dealers in the country slashed bids they were offering farmers for their grain due to expected cuts in production at ethanol plants.
The ethanol market, which accounts for about 39% of U.S. corn usage, has been staggered by the sharp drop in energy prices stemming from the global coronavirus pandemic.
Oil prices plunged on Wednesday, with U.S. crude futures hitting an 18-year low and Brent a 16-year low as Goldman Sachs said lockdowns to counter the coronavirus pandemic raised the prospect of the steepest-ever annual fall in oil demand.
Wheat and soybean futures were stronger, bouncing from recent lows as the rippling effects of the coronavirus spread were seen as boosting demand.
The wheat market was led higher by a 3% gain in K.C. hard red winter wheat futures, which stemmed from rising demand for pasta and baked goods as consumers are forced to eat at home because of coronavirus.
"Wheat mills worry about supply lines cracking before they get needed supplies for milling," INTL FCStone chief commodities economist Arlan Suderman wrote in a note to clients. "The world has plenty of wheat, but it does not have plenty of quality milling wheat."
Soybeans rose as expected slowdowns at ethanol plants would force livestock and poultry producers to substitute soymeal for distillers dried grains (DDGs), a byproduct of ethanol production, in animal rations.
"The other side of the coin is that when you slow down ethanol production you slow down DDG production," said Jim Gerlach, president of A/C Trading. "You are getting a pretty good tailwind from the meal side of things."
At 11:21 a.m. CDT (1621 GMT), Chicago Board of Trade May corn futures were down 8-1/2 cents at $3.35-1/2 a bushel. Prices for the most-active contract bottomed out at $3.32, the lowest since Sept. 30, 2016, early in the trading day.
CBOT May soft red winter wheat was up 9-1/2 cents at $5.08-3/4 a bushel. The May K.C. hard red winter wheat contract was 13-3/4 cents higher at $4.46 a bushel.
CBOT May soybean futures were 3 cents higher at $8.27 1/4 a bushel.