U.S. wheat fell 7 percent to a seven-month low on Wednesday, plunging 30 percent from the 2011 high of nearly $9 set in February as funds bailed out after Black Sea nations moved aggressively into export markets.
Corn fell its daily 30 cent trading limit on spill-over selling, plunging 15 percent from the record high of almost $8 per bushel set just over a week ago.
The sharp declines in both markets, along with a decline in soybeans, could provide temporary relief to global food prices that have soared this year due to high commodity costs.
Analysts said the slump in grains futures is expected to draw a fresh round of buying by end-users, including livestock feeders, ethanol makers and importing nations.
And in a sign of concern over surging food prices, the G20 economic powers agreed on proposals to address volatility in food commodities, with the exception of financial regulation issues, a source close to the negotiations said.
Chicago wheat was pummeled by signs that Black Sea suppliers were returning to export markets after a drought last year trimmed their exports. Improved weather this year boosted the region's crop output and lifted export prospects.
"Tunisia bought Russian wheat at $15 per tonne c&f under FOB French wheat and $20 per tonne under FOB U.S. corn. That's all you need to know," said Charlie Sernatinger, analyst for ABN AMRO, referring to the collapse of wheat futures.
Mike Zuzolo, analyst for Global Commodity Analytics, said there was "a big technical sell-off" in wheat.
"Europe's wheat was sharply lower and there was no technical follow-through yesterday so the momentum has shifted back to the bears," he said.
Corn hit a 1-1/2 month low as spot July broke below psychological support at the $7 per bushel mark and touched off technical sell-stops.
On Tuesday, corn recorded its biggest gain in nearly two weeks on forecasts for hot and dry weather in the Corn Belt and rumors that China was buying U.S. corn.
"In corn, the heat and dryness that was supposed to come in at the end of the month has been taken out of forecasts and there has been no confirmation of China business," Zuzolo said.
Soybeans fell to a one-month low after posting gains for two days.
Technical traders said next support in July corn was $6.59-1/2 and key support was at its 200-day moving average of $6.53.
Though corn prices plunged, buyers could surface during the decline which might signal a bottom for the corn market and turn prices higher.
"I think end-users, especially livestock feeders, will step in and we'll have to see if export demand shows up at the lower prices. There will have to be demand show up before a bottom is in," said Don Roose, analyst and president for U.S. Commodities, Des Moines, Iowa.
At 12:06 p.m. CDT (1706 GMT), CBOT July wheat was down 42-1/4 cents per bushel at $6.32, corn for July was down the 30 cent daily trading limit at $6.77-1/2, and July delivery soybeans were down 19-3/4 at $13.29.
FOOD PRICE FIGHT
Some traders said funds may be exiting the grain market because of a G20 farm ministers summit in Paris that included discussion over France's proposals to tackle surging global food prices.
Measures included putting more commodity trading under the thumb of regulators.
European wheat prices slumped over 7 percent to a new three-month low on signs of intense new competition in export markets from Russia and Ukraine and on a sharp drop in U.S. futures, traders in Hamburg said.
Ukraine's grain harvest is set to rise to 42.5 million-44.5 million tonnes this year from 39.2 million tonnes in 2010, Mykola Kulbida, the head of the country's weather forecasting center, said on Wednesday.
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