U.S. soybean futures rose on Tuesday as early weakness after Monday's lower close gave way to short-covering amid signs of good export demand, traders said.
Wheat and corn fell, their fifth straight day of declines, but trading was choppy in thin volume ahead of the Labour Day holiday. Prices for all three commodities bounced between positive and negative territory during the session.
Investors were wary of staking out new positions, remembering when grain markets experienced a two-month-long breakdown in 2011 after peaking in late August, traders said. A year ago, soybean futures fell 16.7 per cent and corn prices dropped 14.6 per cent even as harvest fell below expectations.
"I think it is a case of harvest pressure starting and a bull market that is a little tired," said Bob Utterback of Utterback Marketing Services, a brokerage for farmers. "We know that supplies are reduced. You just had the culmination of too many longs in the market."
Traders were also keeping a close watch on Hurricane Isaac, which strengthened from a tropical storm on Tuesday morning and is expected to make landfall on the U.S. Gulf Coast early Wednesday.
The expected torrential rainfall and localized flooding would add valuable soil moisture to a large chunk of drought-stricken cropland, but the initial impact will likely stall early harvest of corn and soybeans and could lead to crop diseases, agricultural meteorologist Don Keeney of MDA EarthSat Weather said.
Although some late-planted soybean fields could benefit from additional moisture, rain might only provide a psychological boost in many areas because the soy crop is more mature than ever for this point in the season, said Mark Schultz, chief analyst with Northstar Commodity Investment Co.
Chicago Board of Trade (CBOT) November soybean futures closed up 3-1/2 cents at $17.22-1/4 a bushel. Prices were 2.2 per cent below the contract high of $17.60-1/2 hit early on Monday, which traders said increased the chances for more export deals (all figures US$).
Private exporters reported the sale of 110,000 tonnes of U.S. soybeans to China for delivery in the new marketing year, the U.S. Agriculture Department said on Tuesday.
"We are also having Chinese buying showing up again underneath the market," said Jim Hemminger, senior risk manager with Top Third Ag Marketing. "It seems like every time the beans break a little... then we find very good Chinese buying, and we are finding that again here."
CBOT September soft red winter wheat fell 7-1/4 cents to $8.54-3/4 a bushel while new-crop December corn dropped 5-1/4 cents to $7.95-1/2 a bushel. Corn has dropped nearly five per cent and wheat 5.1 per cent during the five-session losing streak.
"The key corn contracts are losing the battle with $8, as falling crop ratings and hot weather are old hat by now," Matt Zeller, market analyst with INTL FCStone, said in a research note.
"The bears are relieved to see at least some rain in the forecast thanks to (Hurricane) Isaac, even though the trade can agree on the system's likely limited 2012 crop impact either way."
Farmers have slowed harvest to allow crops to dry after recent rains but remain on a record pace. The latest USDA harvest progress report, released at the end of trading on Monday, showed the corn harvest was six per cent complete as of Aug. 26, up just two percentage points from a week earlier, and below analyst expectations for 10 per cent.
Besides slowing harvest, the storm has already disrupted shipping. Grain companies Cargill and Archer Daniels Midland shut down some export elevators in Louisiana as a precaution.
With corn stalk development hindered by the worst drought across the U.S. Midwest in 56 years, high winds from Isaac could flatten crops, analysts warned.
Barge traffic along the Mississippi River between Baton Rouge, La. and the U.S. Gulf has also been suspended. The river is a major channel for the movement of grains produced in the Midwest farm belt to export terminals at the Gulf of Mexico.
Canadian National Railway (CN) closed the Beaumont and McComb subdivisions of its main line in the U.S. Gulf region on Monday and has suspended its industrial switching operations at New Orleans and at Mobile in Alabama.
Traffic meant for the McComb subdivision, which runs from Jackson, Miss. to New Orleans, is now being detoured along the Baton Rouge and Hammond subdivisions of CN's main line, the company said Tuesday.
-- Mark Weinraub reports for Reuters in the Chicago area. Additional reporting for Reuters by Colin Packham in Sydney and Ivana Sekularac in Amsterdam. Includes files from AGCanada.com Network staff.