July 11, 2012 / 11:17 AM / 7 years ago

GRAINS-Markets tumble on profit-taking, rainy forecast

* Corn falls on profit-taking, sheds support from USDA yield
    * Soybeans dragged down by corn despite production worries
    * Rain in eastern Midwest forecast also pressures corn, soy
    * Wheat pulled lower by corn before late-session recovery

    By Karl Plume
    CHICAGO, July 11 (Reuters) - Corn futures tumbled on
Wednesday on profit-taking and as updated forecasts called for
rain in the drought-parched eastern Midwest, erasing gains of
nearly 3 percent earlier.
    Soybeans fell as corn spiralled lower, both shrugging off
early gains from bullish government estimates for a
lower-than-anticipated U.S. crop and tighter stocks. 
    But both settled above session lows as dry weather remained
a concern for crops already damaged by the worst drought in a
quarter century.
    Wheat was also dragged from early peaks, but settled
modestly higher as corn pared losses near the close and as
adverse weather dragged down crop output in some key world
suppliers, including Russia and Ukraine.
    "The latest idea from GFS is for amounts of 0.5 to 1 inch
(of rain), widespread, with some inch-plus amounts scattered in
as well," said John Dee of Global Weather Monitoring, referring
to the U.S. weather model.
    "We are still looking for some rains to develop in southeast
Midwest, and maybe even in the far northern Midwest. But some of
the most critical areas, Iowa and the northern two-thirds of
Illinois, are not going to see too much in the next five days,
other than some spotty stuff," he said.
    December corn on the Chicago Board of Trade fell
13-1/2 cents, or 1.9 percent, to $7.04 a bushel after earlier
peaking at a contract high of $7.48. Spot July fell 10-1/4
cents, or 1.4 percent, to $7.50-3/4, as traders pocketed profits
after the market's recent run to 13-month highs. 
    The historic rally had lifted prices more than 40 percent in
three weeks as the worst drought in 24 years wilted crops. The
drought prompted the U.S. Agriculture Department on Wednesday to
slash its production estimate by a whopping 20 bushels per acre
to 146 bushels per acre in a monthly report. 
    Production may decline even further as dry weather continues
to plague vast areas of the Corn Belt, where the majority of the
corn was pollinating, a key growth phase when cobs sprout grain
and adequate moisture is essential.
    Although forecasts suggested wetter weather in parts of the
U.S. Midwest this week, about half of the region is still in a
significant moisture deficit. 
    "If they can drop it down 20 bushels an acre without going
into the field, then it must be really bad out there. We can
expect to see additional reductions once they go into the fields
and start doing the measurements," said Shawn McCambridge,
analyst with Jefferies Bache.
    But as shrinking supply prospects drove prices to near
13-month highs, demand has also taken a hit as USDA cut
estimates for corn use by ethanol makers, livestock producers
and exporters nearly as much as it cut supplies.
    The historically high prices would cut into margins at meat
companies like Smithfield Foods Inc, Tyson Foods 
and others, crimp profits at ethanol producers and possibly lead
to higher food inflation in the United States and abroad.
    "The USDA cut total supply just like they did in July of
1988 but they also cut total demand almost as aggressively,"
said Mike Zuzolo, president of Global Commodity Analytics,
pointing to the severe drought year to which many are comparing
the current drought.
    "Even if we have that lower yield, we are losing demand. The
export market would suggest that and the ethanol numbers today
would as well," he said.
    The U.S. Energy Information Administration said Wednesday
that weekly ethanol output fell for a fourth straight week last
week to the lowest in nearly two years. 
    Soybeans retreated as corn turned lower and extended
declines amid rainier weather forecasts.
    Prices had been up more than 1 percent near record peaks
reached on Monday as the USDA lowered its view of that crop and
projected global supplies would remain historically tight well
into next year.
    New-crop CBOT November soybeans fell 16 cents, or 1
percent, to $15.22-1/2 a bushel after hitting a contract high of
$15.75. Front-month July soybeans were 25-3/4 cents lower
at $16.23 after climbing to a record high of $16.79-1/2 a bushel
on Monday. 
    Wheat shed earlier support stemming from weather-reduced
production in several key exporting countries, pressured by
sinking corn.
    CBOT September wheat added 5 cents, or 0.6 percent,
and settled at $8.26-1/4 a bushel.
 Prices at 2:42 p.m. CDT (1942 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  750.75   -10.25  -1.4%   16.1%
 CBOT soy                  1623.00   -25.75  -1.6%   35.4%
 CBOT meal                  478.00    -4.20  -0.9%   54.5%
 CBOT soyoil                 53.62    -0.59  -1.1%    2.9%
 CBOT wheat                 807.75     3.00   0.4%   23.7%
 CBOT rice                 1482.50   -32.50  -2.2%    1.5%
 EU wheat                   247.00    -1.50  -0.6%   22.0%
 US crude                    86.15     2.24   2.7%  -12.8%
 Dow Jones                  12,591      -62  -0.5%    3.1%
 Gold                      1574.60     6.91   0.4%    0.7%
 Euro/dollar                1.2235  -0.0014  -0.1%   -5.5%
 Dollar Index              83.5030   0.1030   0.1%    4.1%
 Baltic Freight               1146      -14  -1.2%  -34.1%
    In U.S. cents, benchmark contracts, except EU wheat (euros)
and soymeal (dollars). CBOT wheat, corn and soybeans per bushel,
rice per hundredweight, soymeal per ton and soyoil per lb.
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