U.S. wheat and new-crop corn futures sank to their lowest level in nearly nine months on Wednesday as heavy snows eased dryness in key growing areas and boosted production estimates.
Optimism for upcoming harvests soared after a storm dumped 13 to 25 cm of wet snow on the Midwest on Tuesday, the latest round of precipitation following the worst U.S. drought in more than 50 years. Additional moisture is expected to provide more relief to bone-dry soils later this week.
"Every time you turn on the news, you see moisture falling somewhere, so it's hard to be bullish right now," said Jason Roose, an analyst for U.S. Commodities.
Chicago Board of Trade (CBOT) March wheat dropped 2.9 per cent to $6.76-1/4 a bushel, the lowest close for a nearby contract since June. May wheat, the most actively traded contract, tumbled 3.2 per cent to $6.83-3/4 a bushel (all figures US$).
The U.S. hard red winter wheat crop, which is used to make bread, has been stressed by dryness in the Great Plains since it was planted last fall.
However, crop forecaster Lanworth raised its forecast for U.S. wheat production by six per cent due to recent precipitation in the southern and central Plains.
"Up until a month ago, the ability to produce wheat this coming spring was in doubt, to put it mildly," said Jack Scoville, vice-president of Price Futures Group. "All of a sudden that situation's changed."
Global wheat output also could climb in the coming year due to improved crop prospects for key producers that were hit by severe droughts last year, said Joe Glauber, chief economist for the U.S. Department of Agriculture.
Australia, the world's second-largest exporter, on Tuesday forecast wheat production in 2013-14 would rise 13 per cent from the previous year, boosted by increased planting and higher yields from better growing conditions.
Wheat versus corn
Declining wheat prices weighed on corn, as both grains are used to feed livestock, and fuelled expectations that wheat will be used instead of corn to make ethanol.
Leading U.S. ethanol maker POET Biorefining, in a rare move, is bidding for soft red winter wheat at an Indiana facility as supplies of corn, the main feedstock in ethanol production, shrink to the smallest in 17 years.
Improving U.S. moisture added pressure to the corn market ahead of planting this spring.
The snow "certainly gives the perception that maybe the pattern is changing and when things warm up, maybe we'll see rain," said Jim Gerlach, president of A/C Trading.
CBOT May corn slid 2.9 per cent to $6.88-1/2 a bushel. December corn, which represents the crop that will be harvested in the fall, dipped 1.4 per cent to $5.44-1/4 a bushel.
Awaiting USDA data
Traders are looking ahead to Friday, when the USDA will update its forecasts for 2012-13 U.S. and global wheat, soybean and corn inventories.
Analysts, on average, expect the department to increase its estimates for U.S. wheat and corn inventories from last month and trim its outlook for soybean supplies, according to a Reuters poll.
Soybeans from new crops in Brazil and Argentina are urgently needed to replenish tight global supplies after a poor U.S. harvest last year. But port delays have slowed the flow of beans leaving those countries, forcing importers to look to the U.S. despite higher prices.
Expectations of near-term demand for U.S. soybeans helped underpin soy prices, Scoville said.
Surging prices for ethanol blending credits known as RINs also should help support soybean oil and corn prices down the line, amid lingering concerns about tight supplies, he added.
May soybeans were near unchanged at $14.66/bu., and May soyoil rose 0.3 per cent to 50.26 cents per pound.
-- Tom Polansek covers agriculture and futures markets for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson.