US grain prices extended their drop from record highs on Tuesday as forecasts for rain offered soyabean crops some relief from the worst drought in half a century, triggering profit-taking from a blistering month-long rally.
While some traders said this week's retreat suggested consumers may have seen the worst of the run-up in prices, which surged by a third or more over the past four weeks, others said it was far too soon to call a top as damage reports on the state of the hard-hit corn harvest were only starting to emerge.
Corn, which at one point fell by its 40-cent daily trading limit, ended down only 8 cents, or 1 percent as bargain buyers stepped in. Fresh forecasts calling for rain will arrive too late for corn, they said, while analysts continued to cut back their crop estimates as the scale of damage became apparent. A Reuters poll of 11 analysts on Tuesday projected 2012 average US corn yield at 130.8 bushels per acre, the lowest in 10 years with total production at a six-year low.
"It can rain every day until harvest," said Jason Britt, analyst with Central States Commodities, "On the majority of this corn crop that is out there, you are not going to change yield one iota. This is not a crop saving rain." Scouts on a Midwest crop tour saw corn plants in western Indiana that failed to form ears and will likely go unharvested.
But the rains gave hope for a recovery in soyabeans, which enter their pod-setting yield stage later than corn. Analysts cut their yield estimates by only 1 percent from a week ago. "It (the market) feels fairly confident that we are going to get a change in the weather," said Brian Hoops, analyst for Midwest Market Solutions. "The market is telling us that there is no need to keep as much weather premium as we had in place."
Chicago Board of Trade November soyabean futures ended down 52-3/4 cents at $15.69-1/2 a bushel, having fallen as much as the 70-cent daily limit for about an hour in midday trading. Soybeans have fallen 6.1 percent so far this week, the biggest two-day decline for the spot contract since February 2011. CBOT December corn closed just 7-1/4 cents lower at $7.78-1/4 a bushel, while the front-month September contract was 24 cents lower at $7.90. CBOT September wheat fell 34 cents to $8.78-3/4 a bushel. The drops were the second straight day of setbacks for all three commodities and the first time wheat has fallen on consecutive days since the end of May.