U.S. soybean futures set a three-week low on Tuesday as a swift harvest and profit-taking before key reports sparked selling that accelerated a five-day retreat from record highs.
Benchmark soybeans for November delivery dropped below $17 a bushel for the first time since Aug. 21, while nearby soybeans for September delivery ended down five per cent from last week's all-time high of $17.94-3/4 a bushel (all figures US$). Corn futures touched a seven-week low.
Funds have been liquidating bullish bets in the markets heading into U.S. Department of Agriculture supply-demand and crop production reports due on Wednesday. Investors are uncertain about the extent of crop damage the reports will show from the worst U.S. drought in more than half a century.
Some traders suspect the markets have already factored in the worst of the drought, which devastated crops across the Midwest. Also, rains late last month could have improved yields.
"There is some sense out there that a top may be close or in already," Jim Gerlach, president of A/C Trading, said of the markets.
Chicago Board of Trade (CBOT) new-crop November soybeans, the most actively traded contract, dropped one per cent to $17.01-1/2, and nearby September soybeans lost one per cent to $16.96-1/2 a bushel.
December corn slumped 0.7 per cent, to $7.77-3/4 a bushel.
Soybean and corn futures reached record highs during the summer as the drought slashed harvest prospects at a time when stocks of the crops were already low.
Concerned about tightening supplies, French President Francois Hollande on Tuesday proposed the creation of strategic stockpiles of agricultural commodities to prevent extreme price swings on international markets.
Wednesday's U.S. supply-demand report will be scrutinized to see if more supply cuts are made due to the drought and to what extent demand has been cooled by surging prices.
Analysts polled by Reuters predict the USDA report will show the drought has slashed nearly five billion bushels from the corn crop, or about $40 billion worth at current prices.
For soybeans, analysts on average predict the USDA will trim its crop forecast to 2.657 billion bushels from 2.692 billion in August. However, some expect a slight increase from the August figure because of beneficial Midwest rains last month.
The advancing corn and soybean harvests have added pressure to prices as they brought new supplies onto the markets.
USDA's first update on this year's soybean harvest on Monday showed the crop was four per cent harvested, which topped the five-year average of two per cent and expectations for three per cent harvested.
USDA also said the condition of soy plants had improved, reinforcing market sentiment that parts of the Midwest benefited from rain last month.
The corn harvest was 15 per cent complete, above the five-year average of five per cent.
"Newly harvested corn is hitting the market faster than it can be used," said Karl Setzer, grain solutions team leader for MaxYield Co-operative.
Traders also were liquidating bullish bets as they waited for the U.S. Federal Reserve to wrap up a two-day policy meeting on Thursday, which could bring further stimulus action or guidance on interest rates, said Rich Nelson, chief strategist for Allendale.
"The trade has (taken) risk off until we get confirmation," he said.
Egypt buys wheat
CBOT December wheat stumbled 0.7 per cent to $8.83-3/4 a bushel on spillover pressure from losses in the corn market.
Egypt, the world's top wheat importer, bought 235,000 tonnes of wheat from Ukraine, Russia and France on Tuesday.
It was Egypt's sixth international wheat purchase in a month and the first time it bought wheat since January. The deals came amid growing worries that Russia and other Black Sea suppliers may restrict grain exports before the end of the year after a drought slashed production for the second time in three years.
Russia insists it will not curb exports.
Australia, another key wheat exporter, cut its forecast for wheat production in the 2012-13 crop marketing year by about seven per cent from its previous forecast to 22.5 million tonnes due to dryness.
-- Tom Polansek reports on the agriculture sector from Chicago for Reuters. Additional reporting for Reuters by Karl Plume in Chicago, Gus Trompiz in Paris and Naveen Thukral in Singapore.