Chicago wheat prices fell to a seven-month low on Tuesday after much-needed precipitation provided some moisture to the drought-stricken winter-wheat growing area of the United States.
Corn also slipped, extending its losing streak to the longest since mid-2007, on a potential rebound in world grain supply this year, while soybeans dipped.
Snow and rain showers were moving across the U.S. Southwest Plains, which will help but not eliminate the harmful impact on wheat production from the worst drought in more than 50 years, said U.S. agricultural meteorologist Don Keeney of MDA EarthSat Weather.
"The market’s breaking lower with an increasing chance of rain in some of these dry areas," said Don Roose, president of Iowa-based U.S. Commodities.
Pressure from improving weather outweighed support from a cut to U.S. wheat stocks in U.S. Department of Agriculture data on Friday.
Chicago Board of Trade (CBOT) March wheat dropped 9-1/2 cents, or 1.3 per cent, to $7.32 a bushel (all figures US$). It dipped as low as $7.25-1/2, the lowest nearby price since June 29.
Australia, the world’s second-largest wheat exporter, also slightly raised its production forecast for the current marketing year from its December estimate, after the crop largely escaped damage from a heat wave and floods this summer.
The needed moisture for U.S. wheat crops came as the expectations of large corn and soybean harvests in South America were already weighing on grain markets.
"The most obvious reason behind (the fall in prices of) wheat is some improvement in weather conditions in the U.S. where many people were expecting a good deal of damage to the red winter crop due to the dry winter," said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm.
March corn fell six cents, or 0.9 per cent, to $6.96-1/4 a bushel. It earlier fell to $6.91-1/2 a bushel, its lowest level since Jan. 11. Corn registered its eighth straight loss, extending its longest losing streak in 5-1/2 years.
"This market is fully realizing that yes, the supply problem will be taken care of with the fall harvest," said Rich Nelson, chief strategist at Allendale Inc., but cautioned that 2012 also shaped up as a record year before drought devastated crops.
The market will look to fresh planting estimates from the USDA at its annual forum late next week. The acreage estimates could be even larger than the USDA’s baseline projections released on Monday, Nelson said.
"We have a string of big-picture news that is a little bearish and will weigh on the market throughout this month."
Funds further pressured corn by cutting their long positions, traders said.
USDA projects U.S. corn output to rise 34 per cent to a record 14.4 billion bushels this year, assuming a return to normal weather and yields after droughts stunted output in 2012.
March soybeans lost 10-3/4 cents, or 0.8 per cent, to $14.20-3/4 a bushel, giving up earlier gains and touching the lowest nearby price since Jan. 24. Prospects for a big South American harvest and technical selling weighed on the oilseed.
"(Corn) bled through $7, and never really recovered from that. That negated all the strength in the soybeans," said Sterling Smith, futures specialist with Citigroup. "Corn is king, and what corn does is going to drive other things."
Soybeans were also hampered by the closure of Chinese markets this week for Lunar New Year and a holiday in Brazil, Smith said.
"There is no reason for anyone to be bullish right at these price levels, at this moment in time," he said.
On Friday, the U.S. Department of Agriculture cut its U.S. soybean end-of-season stocks forecast to 125 million bushels, below the market consensus.
But prospects for large South American crops caused Goldman Sachs on Monday to cut its price forecasts for both corn and soybeans. The investment bank also lowered its outlook for wheat prices due to low demand for U.S. exports.
— Rod Nickel is a Reuters correspondent based in Winnipeg. Additional reporting for Reuters by Julie Ingwersen in Chicago, Natalie Huet in London, Mayank Bhardwaj in New Delhi and Gus Trompiz in Paris.