U.S. soybean futures fell two per cent on Monday and appear headed for their biggest daily slide in almost a month due to long liquidation prompted by crop-friendly weather forecasts for top producer Brazil and by concerns of Hurricane Sandy's impact on the U.S. financial sector.
The sell-off in soybeans pulled down wheat and corn, although both grains were underpinned by worrisome weather for wheat in the southern U.S. Plains, Australia and elsewhere.
Soybeans had the most severe moves at the Chicago Board of Trade, falling more than 30 cents per bushel and down for a third straight session as forecasts called for improved soybean planting weather in Brazil. The global grain trade is counting on Brazil and Argentina to produce a bumper soy crop in early 2013 after drought clipped the 2012 U.S. harvest as well as the previous South American crop.
The Brazilian government has forecast that the country will produce 80 million to 82.8 million tonnes of soybeans for the 2012/13 season, surpassing U.S. production of 77.8 million. The U.S. Department of Agriculture has projected Brazil's crop at 81 million tonnes.
If the crop forecasts are verified, Brazil and Argentina should combine for slightly more than half of global soybean output for 2012/13, a factor that is magnifying any shifts in weather as farmers continue planting.
After soaking Brazil's southern soy states of Rio Grande do Sul and Parana, storms are expected to move northward in early November into the country's main center-west soy belt and northeast regions, which need more moisture.
"The forecast models finally show more consistent rains for the center-west and northeast regions," Brazilian forecaster Somar said in a daily report.
"The situation is definitely improving for South America. Forecasters all seem to be in agreement that the weather is going to turn out to be better than expected," said Mark Schultz, analyst with Northstar Commodities in Minneapolis.
At the CBOT as of 12:10 p.m. CDT (1710 GMT), most-active January soybeans were down 32-1/4 cents, or 2.1 per cent, at $15.29 per bushel. December wheat was down 3-1/4 cents at $8.60-1/2 a bushel while December corn was up 1/2 cent at $7.38-1/4 a bushel.
Hurricane Sandy, barrelling toward the U.S. East Coast, also appeared to pressure the markets. The storm, which could become the largest ever to hit the United States, shut trading on Wall Street and closed U.S. government offices.
Wall Street traders were preparing for the possibility of another day of closed financial markets on Tuesday after the storm caused the first weather-related shutdown of U.S. stock markets in 27 years on Monday.
"This storm is coming on more aggressively than the trade was prepared for, meaning that the ability of the banks and exchanges to reopen within one to two days is now probably being questioned by a lot of the New York traders," said Mike Zuzolo, president of Global Commodity Analytics in Lafayette, Indiana.
"I am picking up word that maybe the funds in New York are limiting and reducing their risk because of this hurricane, and that was probably the exposure on the long bean side," Zuzolo added.
The weekly U.S. crop progress report, normally released on Monday afternoons, will be delayed as the federal government closes down ahead of Sandy, the U.S. Department of Agriculture said, adding that the rescheduled release time would be announced as soon as offices reopen.
Sandy is unlikely to have a direct impact on U.S. crops although it may disrupt the transport of grain, analysts said.
Worrisome wheat weather
Wheat turned lower on spillover pressure from soybeans as well as disappointing weekly U.S. export data. The USDA reported export inspections of U.S. wheat in the latest week at 9.7 million bushels, down 40 per cent from 16.4 million the previous week.
"Unless we get some supportive export news, the path of least resistance is lower," said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago.
Also bearish, the U.S. dollar index rose to a six-week high on uncertainty over whether Greece can agree to a deal on austerity and with no sign of when Spain might request aid. A firmer dollar makes dollar-denominated commodities, including grains, less competitive on the world market. Concerns about unfavorable weather in several key wheat-exporting countries, including Australia and the southern U.S. Plains, underpinned values.
Technical buying limited losses in the corn market. CBOT December corn rebounded after holding support at its mid-October low of $7.32-1/2, and traders were watching to see whether the contract could stay above its 100-day moving average near $7.37. December corn has not closed below its 100-day average since mid-June.
In a reminder of weak export demand for U.S. corn, private Egyptian interests have in past days purchased about 180,000 tonnes of corn from South America, European traders said Monday. It was thought largely to have been bought from Argentina, traders said.
Julie Ingwersen is a Reuters reporter based in Chicago