U.S. grain markets Friday snapped a furious three-week rally that had sent corn prices up more than a third since mid-June, as a downbeat U.S. jobs report provided an excuse for traders to book profits.
Although new U.S. Midwest forecasts showed only marginal relief from what may be the worst drought in a quarter-century, traders said grain markets were due for a pull-back after soybeans pushed to within 20 cents of an all-time high and corn raced back above $7 a bushel a day ago for the first time in 10 months (all figures US$).
After largely ignoring volatile trading in the wider commodities complex in recent days, grain traders appeared on Friday to take note of broad losses following data showing U.S. employers add a meager 80,000 jobs in June. The ThomsonReuters Jefferies CRB index dropped more than two per cent.
At mid-morning, corn and soybeans briefly cut their losses, as investors sought relative bargains with worries about crop damage continuing, before the selloff resumed.
"We've got a lot of liquidation of length, people taking profits going into the weekend, and part of the reason for that is you have some uncertainty in the weather forecast," said Terry Linn, analyst at the Linn Group.
"The profit-taking is being helped by us going from extreme heat and dryness to moderating that a little bit."
Chicago September wheat fell 3.8 per cent, while December new-crop corn dropped 2.2 per cent, weighed down by U.S. data showing lower than expected export sales that stirred concerns that high prices may be hurting global demand. November soy slid 1.4 per cent after gaining about 15 per cent over the past three weeks.
December corn is still up 37 per cent over three weeks, and with early crops wilting during their critical pollination stage, few believe the rally has run its course.
"It's a temporary setback as we wait for weather, for moisture," said Rich Nelson, analyst at Allendale Inc.
In one indication of the drought's damage, Informa Economics lowered its estimates of the U.S. corn yield to 153.5 bushels per acre from 154.9 bushels, and the U.S. soybean yield to 42 bushels per acre from 42.7.
Informa's corn yield estimate is not as low as a forecast from Commodity Weather Group on Thursday of 152.2 bushels per acre.
Chicago Board of Trade new-crop December corn fell 15-1/2 cents to $6.93 a bushel, after hitting a contract high of $7.13 on Thursday. On the week, nearby July corn finished with a 10.5 per cent gain.
The most-active November soy contract fell 1.4 per cent, or 20-3/4 cents, to $15.05-3/4 a bushel, but the nearby July contract ended the week up 7.1 per cent, its biggest weekly gain in nearly nine months.
Chicago September wheat fell 3.8 per cent, or 31-3/4 cents, to $8.06-1/4, while the nearby July contract posted a 7.1 per cent weekly gain -- its third straight.
Heat until Sunday
The U.S. Corn Belt endured another day of excessive heat on Friday that will persist in southern areas on Saturday, but a cold front should usher in more seasonal temperatures by Sunday, easing stress on crops, meteorologists said.
"We are going to be excessively hot today, with highs of 100 to 105 (degrees Fahrenheit) common from Kansas to Indiana, with some areas up to 108 F (42 C)," said Andy Karst, agricultural meteorologist for World Weather Inc. at Kansas City.
"We are going to have a cool-off beginning Sunday. It will be 15 degrees cooler, so that will definitely help," Karst said.
Midday weather forecasting models showed a break in the heat over the weekend, but an even hotter outlook for the 11- to 15-day period, said Joel Widenor, agricultural meteorologist with Commodity Weather Group.
With fresh yield estimates possibly included in next Wednesday's U.S. Department of Agriculture monthly report, investors consolidated their gains, said Mike Zuzolo, president of Global Commodity Analytics in Indiana.
"We are going to cool off (in the Midwest), and we have hit some major levels in the cash corn prices," he said.
With corn prices closing in on last summer's all-time high of $7.99-3/4, the U.S. Department of Agriculture reported paltry U.S. export sales of 153,400 tonnes for the old and new crop years, signaling that high prices may be hurting demand, Nelson said.
"We're seeing signs that demand might be hit, but demand won't be the issue that stops this rally," he said, adding that weather will drive the market's direction.
Demand for soybeans continued to be strong, however, with the USDA exceeding expectations with nearly 1.8 million tonnes sold in the latest week, and reporting a single sale of 120,000 tonnes to China for 2011-12.
"What it does indicate is panic setting in," said Anne Frick, analyst at Jefferies Bache. "We already had the prospects for an extremely tight balance sheet even before we had any indication of crop problems."
The USDA had reported on Monday the fifth largest soy sale on record -- 1.19 million tonnes of U.S. soybeans to an unknown buyer -- but that sale fell after the time period covered by the most recent weekly export report.
Wheat sales of 418,900 tonnes came in near the high end of a range of expectations.
On a continuation basis, wheat has gained about 30 per cent, its biggest three-week rally since April 1996, but its rise is largely due to corn's influence.
The outlook for wheat crops in Western Europe has improved after June rains, but dry sunny weather is now needed.
-- Reporting for Reuters by Rod Nickel in Winnipeg and Julie Ingwersen and Mark Weinraub in Chicago.