US wheat futures prices fell on Monday to their lowest levels in more than two weeks as traders locked in profits after a forecast for rain in northern Russia gave hope for some relief from a drought that devastated Black Sea region crops and sent wheat prices skyrocketing.
Wheat's decline also gained momentum, traders said, from rumours that Russia would honour its sales to Egypt and that Ukraine would introduce export quotas. Either development would ease concerns about Black Sea supplies and grain movement. Corn and soybean futures gave up earlier gains on spillover pressure from wheat, with nearby corn falling for the first time in four sessions. Front-month soybeans lost ground for the fourth time in six sessions.
Wheat futures on the Chicago Board of Trade plunged 5.5 percent to the lowest intra-day price since July 30 as traders learned of the Russian rain forecast, even though the longer-range forecast for the weekend and next week in Russian growing areas looked dry, said Rich Nelson, director of research at Allendale Inc.
"We're already running into harvest in a lot of those drought areas now so the impact of further heat and dryness, if it does return, is probably minimised. The damage is already done." The Russian weather forecasting service said rains from Monday to Wednesday are unlikely to soften crop damage but may improve conditions for winter grain sowing.
Nearby Chicago wheat is down 21 percent from its two-year high of $8.41 on August 6, but is still up nearly 60 percent from early June. Wheat futures prices "will be back and forth until we get more clarity out of Russia. We've reached a plateau on Russia and everyone knows the crop has been hurt, now we need to know where the demand is going," said Joe Bedore, CBOT floor manager for trade house FC Stone.
CBOT September wheat dropped 38-3/4 cents to $6.63-3/4 per bushel, while benchmark November milling wheat in Paris fell 1.2 percent to 212 euros. The worst drought in more than a century in Russia has prompted authorities to suspend grain exports through the end of the year. Analysts at SovEcon downgraded Russia's total grain crop to between 59.5 million and 63.5 million tonnes, down from a previous forecast of 70 million-75 million.
US and European Union wheat have already seen spillover demand as shipments dwindle from Russia and other Black Sea exporters, and US wheat last week recorded its biggest weekly export volume in nearly three years. On Monday, Egypt's main wheat buying agency said it wanted to buy 55,000 to 60,000 tonnes of hard wheat from the United States, Canada, Germany and Australia for shipment September 16-30. Low wheat prices pulled down CBOT corn and soy futures, which also weakened from a turn to better crop weather this week in the US Midwest.
On the annual US Midwest crop tour, scouts said on Monday that earlier heavy rains appeared to be taking a toll on corn yield potential in eastern South Dakota, but soybean yields looked above average. Beneficial early summer rains boosted corn yields in central and north-west Ohio, but recent excessive heat has trimmed some yield potential, scouts said.
Earlier on Monday, analysts surveyed in a Reuters poll said they expected a combination of heat and flooding to lower US corn and soybean crop condition ratings when the US Agriculture Department issues its weekly report after trading hours on Monday. CBOT September corn fell 1.1 percent to $4.07-1/4 a bushel, and September soybeans dropped 0.9 percent to $10.34 a bushel.