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Weather pressures soy; demand woes weigh on wheat, corn
March 8, 2011 / 8:46 PM / in 7 years

Weather pressures soy; demand woes weigh on wheat, corn

CHICAGO (Reuters) - U.S. grain futures fell on Tuesday for a second straight day, pressured by a strong dollar and high oil prices, both of which could crimp demand.

Traders also were consolidating positions ahead of a U.S. Agriculture Department report that is expected to lift the soybean stocks forecast for the first time in 11 months.

Corn prices have dropped 3.1 percent during the past two days while soybean prices were off 2.3 percent.

“The major thing weighing on things is the pre-report mind-set and the idea that the trade is going to see bigger bean numbers,” said Mike Zuzolo, president of Global Analytics & Consulting LLC. “I think the beans are probably the heart of the downside.”

Expectations for a bumper soybean crop from South America also weighed on prices, as well as rainy conditions in the drought-stressed U.S. Plains that were providing some relief to the hard red winter wheat crop there as it emerges from dormancy.

Concerns about dryness in Argentina have supported corn and soybean prices throughout the winter but crop forecasters have boosted their harvest outlook for that region during the past week.

“It just feels like things have improved a bit in South America,” said Dan Kuechenmeister, manager in the commodities department at RBC Dain Rauscher.

Prices bounced off session lows shortly after the open as bargain hunters swept in following steep declines on Monday. Corn and soybeans settled above their intraday lows but wheat weakened again near the end of trading.

Volumes were again light, coming in below the 30-day averages for corn, soybeans and wheat. Traders said the thin volumes suggest that more buying could surface as grain elevators and processors seek to hedge their cash market deals.

“When you get down to these levels, you are going to find some end user buying,” Jim Gerlach, president of commodity brokerage A/C Trading in Fowler, Indiana.

CBOT May soybeans settled down 13 cents at $13.82 a bushel. CBOT May corn fell 12 cents to $7.05-1/2 a bushel and CBOT May wheat dropped 21 cents to $7.79-3/4 a bushel.

“The market has lost its ability to spring back,” one French trader said, adding a lack of major new demand was helping to cool prices.

The USDA is expected to raise its forecast of U.S. soybean ending stocks, due a slowdown in domestic usage. The USDA has cut its estimate or left it unchanged each month since it released its first forecast of 2010/11 soy ending stocks last May.

“I don’t think soybeans are in same position as corn where stocks are incredibly tight,” said Abah Ofon, an agricultural commodities analyst at Standard Chartered Bank. “We are seeing crops in Latin America improving and that was the main concern, now there have been good rains in Brazil and Argentina.”

Additional reporting by Nigel Hunt in London and Naveen Thukral in Singapore; Editing by David Gregorio and Lisa Shumaker

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