Corn, soybean, and wheat prices dropped sharply following the spike on Nov. 9, says University of Illinois agricultural economist Darrel Good.

December 2010 corn futures declined 96 cents from their high on Nov. 9 to their low on Nov. 23. January 2011 soybean futures dropped $1.45 by Nov. 19, and December 2010 wheat futures declined by $1.36 to their low on Nov. 16, he noted.

“Since the recent lows were established, prices have traded in a relatively narrow range. A number of factors have been cited as contributing to the wide swing in prices over the past three weeks. These include uncertainty about Chinese demand, fluctuating currency values, trading activity of commodity speculators, and the La Niña weather event. The market appears to be having some difficulty identifying value of commodities,” he added.

The value of the U.S. dollar is thought to have an impact on the demand for and/or prices of U.S. crops through the export market. A lower-valued dollar relative to the value of other currencies makes U.S. commodities more competitive in the world market.

“That impact is diminished for soybeans, however, for at least two reasons. First, South American soybeans are also valued in U.S. dollars. Second, China is the largest importer of soybeans, and the value of the Chinese currency has also remained low,” he said.

In addition, although China may time purchases based on price expectations, it is apparent the quantity of Chinese imports is ultimately based on meeting domestic needs. Those needs are currently very large.