U.S. soybean futures fell to a five-month low on Friday on word that China, the world's top importer of the oilseed, canceled orders, while wheat sank to a four-month low.
Grain markets pared losses and corn turned higher as equities firmed after congressional leaders said their meeting with U.S. President Barack Obama about the "fiscal cliff" was constructive, traders said.
But the U.S. government's decision to maintain its mandate to add corn ethanol to motor fuel did little to support prices, said Jerry Gidel, chief feed grain analyst for Rice Dairy.
Several states had asked regulators to waive the mandate following the worst U.S. drought in 50 years, saying it was driving food and feed prices higher.
"I'm not sure anybody in this world believed that they were going to change," Gidel said.
Pushing down prices was the cancellation of about 600,000 tonnes of U.S. soybeans by China. The deals were scrapped, the China National Grain and Oils Information Center said, because weak domestic demand and a recent drop in prices made them unprofitable.
Losses in soybeans spilled over into wheat, traders said.
"The Chinese news about cancellations puts beans in the driver's seat again to the downside," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.
January soybeans tumbled 1.3 per cent to $13.83-1/4 a bushel at the Chicago Board of Trade. December corn jumped 0.8 per cent to $7.27 a bushel, while December wheat fell 0.9 per cent to $8.38 a bushel (all figures US$).
Soybeans have dropped 23 per cent since reaching an all-time high of $17.94-3/4 on Sept. 4, erasing gains from the U.S. drought.
Cancellations upstage sales
The U.S. Department of Agriculture, in a monthly crop report on Nov. 9, helped fuel the latest sell-off with a surprisingly big estimate for U.S. soybean production and an increased outlook for global supplies.
The USDA on Friday said soybean export sales last week were 585,200 tonnes, a two-week high that topped estimates for 250,000 tonnes to 550,000 tonnes. The sales were not impressive in light of the news about cancellations, traders said.
"If we see another big break to the downside, who's to say China won't cancel more?" Zuzolo said.
Traders also are keeping a close watch on soybean planting in Brazil and Argentina -- the world's second- and third-largest exporters, respectively -- with buyers expecting bumper crops early next year to ease global supply tightness.
Conditions are largely favourable in most growing areas, with the exception of some flooding in portions of Argentina and pockets of dryness in northwest Brazil, said Andy Karst, meteorologist for World Weather Inc.
Wheat demand struggles
Wheat prices fell for the sixth consecutive session amid technical selling and lacklustre demand. For the week, the CBOT December contract lost 5.5 per cent, its biggest weekly loss since early June.
Traders expect export demand will increase due to declining prices and shortfalls among other major exporters.
Yet, wheat export sales of 314,500 tonnes were just a two-week high and within analysts' estimates for 250,000 tonnes to 450,000 tonnes. Corn export sales were a six-week high of 312,000 tonnes, within estimates for 200,000 tonnes to 400,000 tonnes.
"All this confidence about a pick-up in U.S. export demand is tough to have if sales are not happening," said Kayla Burkhart, broker for SunPrairie Grain.
Traders are waiting to see whether Egypt, the world's largest importer of wheat, issues a tender to buy.
Meanwhile, commercial shipping traffic on a stretch of the Mississippi River likely will be restricted at some point in the coming weeks due to low water.
Some 60 per cent of U.S. grain exports are shipped to Gulf Coast export terminals in barges via the Mississippi River and its tributaries.
-- Tom Polansek covers agriculture and the CBOT for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson in Chicago, Sybille de La Hamaide in Paris, and Naveen Thukral in Singapore.