U.S. soybean futures fell nearly two percent to a three-and-a-half-month low on Monday, breaking key technical support at the US$15 per bushel mark in a sell-off on anticipation of a bumper crop in South America and improving harvest yields in the United States.
Soybeans are down 17 per cent, or $3, from the record high $17.94-3/4 set on Sept. 4 on fund buying during the worst drought in half a century that led to fears of a shortfall of soybean supplies (all figures US$).
"Funds were big buyers on the way up and they're sellers now, I don't see any support until we get down to $14.75, the bottom of the gap... basis November," said Sterling Smith, futures specialist for Citigroup.
That chart gap was established from July 3 to 5.
"It's a combination of Brazilian weather, they had rain where they needed it in the north, and there is more liquidation," said Brian Rydlund, market analyst for Minnesota-based firm Country Hedging.
"The July 3 gap is a goal for technical traders, we got down into the gap but haven't filled it yet but we're going to," Rydlund said.
Chicago Board of Trade (CBOT) November soybean futures were down 29 cents per bushel at 14.93-1/2.
Corn fell over two per cent, declining for the second day in a row on spillover selling from the plunging soybean market and talk that the United States was importing corn from South America, traders said.
Corn is now down about five per cent from the one-month peak of $7.73 per bushel hit last Thursday following the release of a U.S. government report that showed U.S. corn ending supplies by the end of next summer at a 17-year low and below analyst estimates.
Kent Beadle, also a market analyst for Country Hedging said, "after only two sessions we're back to where we were in corn before the report. Money is leaving commodities because of the macro issues in Europe and China."
Crude oil was down sharply early on Monday then turned nearly flat, the dollar turned firm and the euro swung between gains and losses as investors awaited clarity on when Spain may request a bailout.
The global economic uncertainty was driving investors away from commodities such as grains in a risk-off day.
"That and from falling soybeans. They're hell bent on driving beans into the gap from $14.74-3/4 to $14.93 that was set in early July," Beadle said.
CBOT December corn was down 16 at $7.36-3/4 per bushel.
Wheat dropped to a two-month low on waning U.S. wheat exports but the winter wheat traded on CBOT fell over twice as much as the high-protein spring wheat traded on the Minneapolis Grain Exchange (MGEX).
CBOT December wheat was down 8-1/2 at $8.48 per bushel while MGEX December wheat was down 3-1/4 at $9.21.
"There are rumours of sales to China. The rumors are four to six cargoes of Canadian wheat but it would be supportive to Minneapolis since it would probably be hard red spring wheat," said Kent Beadle, also a market analyst for Country Hedging.
"Supplies of high-protein wheat are already tight so any further drawdown in stocks would be supportive to Minneapolis futures," Beadle said.
Glut of soy coming?
Commerzbank said in a market note that the current slide in soybean prices was likely "due to speculations about a massive expansion of soybean supply in South America."
Brazil and Argentina, the No. 2 and No. 3 soy producers after the United States, are likely to seed large areas to take advantage of historically high prices.
"It continues wet in Argentina and Brazil will receive rains off and on for the next week to 10 days so weather looks pretty good," said John Dee, meteorologist for Global Weather Monitoring.
South American farmers are preparing to plant the corn and soybean crops that will be harvested in early 2013.
The U.S. Department of Agriculture has forecast Brazil's soybean crop for next year at 81 million tonnes, up from this year's output of 66.5 million and Argentina's crop next year was pegged by USDA at 55 million tonnes, up from this season's harvest of 41 million.
The National Oilseed Processors Association on Monday said the U.S. soybean crush in September totalled 119.732 million bushels, above an average of analysts' estimates for 118.361 million.
U.S. Commodity Futures Trading Commission (CFTC) weekly data issued on Friday showed large speculators had cut their bullish bets on soybeans for the sixth straight week.
Corn is down 13.3 per cent from the record $8.49 set on Aug. 10 as the worst drought in over 50 years slashed U.S. crop prospects.
The high prices prompted imports of cheaper corn from South America to make up for the shortfall in supply, trade sources said.
Trade sources said on Friday that U.S. livestock companies signed deals to import about 600,000 tonnes of corn from Argentina, which comes on the heels of a 750,000-tonne purchase of Brazilian corn last month by three North Carolina livestock companies.
-- Sam Nelson covers grain and oilseed markets in Chicago for Reuters. Additional reporting for Reuters by Nigel Hunt in London and K.T. Arasu and Karl Plume in Chicago.