Corn, soy sink as risk premiums evaporate

By K.T. Arasu

CHICAGO (Reuters) - Corn and soybeans fell nearly 3 percent on Monday as risk premiums built into the market in case of crop failure peeled away as favorable weather in the grain belt boosted production prospects.

Traders said some investors were reducing their exposure in grains markets amid concerns over legislation being mulled by U.S. lawmakers to curb speculation in commodities markets.

"Some may be getting out because of concern about increased government influence in markets, but I think this exodus is money mangers getting out because of weather and technical selling," said analyst Dan Cekander of Newedge USA.

The declines came even as oil prices gained more than $1 a barrel -- though they were still well below the record high of over $147 -- and gold rose 0.58 percent. The dollar slipped after rising against the yen and paring losses against the euro.

The health of the U.S. corn and soybean crops, pummeled last month by the worst floods in the Midwest in 15 years, has been improving, and traders were expecting a government report due later on Monday to show further gains.

"Crop conditions continue to improve, and the market is taking another layer of risk premium off," said analyst Don Roose of U.S. Commodities in West Des Moines, Iowa.

"Weather this time of year is the dominant force in the marketplace," he said, adding that the risk of lower yields reduces significantly once the corn crop completes the critical pollination stage of development that takes place in July.

Corn futures for September delivery at the Chicago Board of Trade fell 17-1/2 cents, or 2.87 percent, to $5.92 a bushel at 1:01 p.m. CDT (2:01 p.m. EDT) time.