Corn sinks to six-week low

US corn futures sank to a six-week low on Monday as traders moved out of bullish bets ahead of US government reports that will give updates on crop damage from the worst US drought in half a century. The US Department of Agriculture's monthly supply-demand and crop production reports on Wednesday could provide insight into whether this summer's rally in corn and soyabean prices to record highs can run longer.
With people around the world worried about higher food prices, market watchers will scrutinise the latest reports' yield and production estimates. Traders said there was a better chance for a bullish surprise for soyabean futures than corn in the reports because they felt they already had a good handle on damage to the corn crop.
"There's a little more fear for the longs in the market that this report is not going to give them anything that they want for corn, but it could for beans," said Tim Hannagan, grain specialist for Alpari, referring to traders who are betting on higher grain prices.
Chicago Board of Trade new-crop December corn tumbled 2 percent to $7.83-1/4 a bushel. November soya lost 1 percent to $17.18-1/2 a bushel, while December wheat slid 1.7 percent to $8.89-3/4 a bushel. Commodity funds sold an estimated net 8,000 contracts of corn futures on Monday, trade sources said. They sold 3,000 wheat and 6,000 soyabeans.
Private analysts on average predicted the USDA will trim its soyabean crop forecast to 2.657 billion bushels from 2.692 billion in August, according to a Reuters poll. However, there is uncertainty as some expect a slight increase because of Midwest rains last month. CBOT soyabeans set a record high of $17.94-3/4 on Sept. 4 and were firmly on the uptrend until brokerage INTL FCStone raised its soyabean yield estimate on Thursday to 36.7 bushels per acre from its August forecast of 36.2 bushels.
Some experts, like FCStone, saw periodic rains in August in the northern and eastern parts of the Midwest farm belt as helping the soyabean crop, which typically comes to maturity that month after the corn crop pollinates in July. Germany's Commerzbank said in a daily note that it believed the market had priced in a soyabean crop of 2.6 billion bushels. A larger-than-expected harvest estimate could pressure prices, according to the note.
"The world is going to react to the soyabean number," said Jerry Gidel, analyst for Rice Dairy. Still, analysts were looking for a drop in USDA's corn output estimate to 10.380 billion bushels from its August forecast of 10.779 billion, according to the Reuters poll.