Wheat prices fell 3.6 percent Tuesday after China said it has adequate reserves to satisfy demand for the grain despite a drought that has affected its winter crops. The drought has affected about 18 million acres of China's winter wheat crop.
The news eased concerns that China's weather-related issues could aggravate the tight global wheat supply heading into the spring planting season. The government has said it will spend $1 billion to alleviate the dry conditions.
Some analysts have speculated that the country would be forced to import wheat to satisfy domestic demand. But Chinese government official said Tuesday that the country has plentiful reserves and the drought will not affect global food prices.
Investors opted to sell wheat, corn and soybeans to take profits after contract prices for all three recently have hit levels not seen since the summer of 2008, Telvent DTN analyst Darin Newsom said. Investors are awaiting a clearer picture of how they will fare in this year's growing season.