U.S. soybean futures tumbled by the daily trading limit on Monday, posting their biggest percentage drop in nearly one year, on selling sparked by anecdotal accounts of better-than-expected yields in the Midwest farm belt.
Corn at the Chicago Board of Trade (CBOT) tumbled to a more than two-month low while wheat sank five per cent under the weight of soybeans, which were considered to be the strongest fundamentally of the three. Soy's stocks-to-use ratio, a measure of demand, was the lowest in nearly five decades.
CBOT November soybeans fell 70 cents per bushel -- the most a contract can move either way on a trading day, as set by the exchange -- after accounts that farmers were getting better-than-expected yields in harvesting over the weekend (all figures US$).
Some of the better yields were coming from the wester Midwest, an area that had remained dry as the worst drought in half a century devastated crops. The northern and eastern parts of the Midwest got beneficial rains in August.
Prices for soybeans in the cash markets in Iowa, the top corn and soybean state, fell sharply about two weeks ago, perhaps in an early signal of the better yields being harvested now.
Traders also attributed the sell-off to rains in Brazil, the world's second-largest exporter of soybeans after the U.S., as its farmers gear up to plant their crop.
CBOT November soy slid four per cent to $16.69 a bushel and registered the lowest front-month price since Aug. 20.
CBOT new-crop December corn sank 4.4 per cent or 34 cents to $7.48 a bushel and touched the lowest price for a nearby contract since early July.
December wheat fell five per cent or 46-1/4 cents to $8.78 per bushel.
The severe U.S. drought in the Midwest drove nearby corn prices to a record high in early August and pushed soybeans to an all-time top in early September, leading to thoughts that buyers would ration demand in the face of high prices.
The U.S. corn crop looks to be the smallest in six years, and the soybean crop the smallest in nine years, the U.S. Department of Agriculture said last Wednesday.
But with the harvest advancing, a dismal situation might be improving slightly.
"There have been reports of yields being better than expected during the harvest over the weekend, and farmers were also selling more corn than expected because they don't want to store grain that is affected by diseases," said Charlie Sernatinger, vice-president of sales at ABN AMRO.
Trace amounts of aflatoxin, a naturally occurring toxin, have shown up in some of the corn harvested in the U.S. Any major outbreak has the potential to snarl the grain-handling system.
Jeff Hainline, president of Advance Trading, said he was getting anecdotal accounts of better-than-expected yields from grain elevators and farmers in the Midwest.
"It's nothing scientific, but these are people we trust," he said, adding that there were accounts of soybean yields being better than expected in the western Corn Belt.
The fields harvested so far show a big variance in corn yields. Analysts said yields averaged from just five to 10 bushels per acre in some fields to 160 to 175 bushels in others.
Analysts polled by Reuters were expecting the corn harvest to be 24 per cent complete and soybeans nine per cent. The USDA will update the harvest progress later on Monday.
Wheat was pulled down by wheat, long liquidation and favourable rains in parched areas of Australia.
The grain markets got a boost last week from the U.S. Federal Reserve's latest economic stimulus plan, but that euphoria has passed, and outside markets did not offer the same bullish lift, said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago.
Speculators, who cut their net long positions in Chicago grains according to the most recent regulatory data, are responsible for some of the selloff.
"From a fund perspective, the upside potential is very limited," McCambridge said.
-- Rod Nickel and K.T. Arasu write for Reuters from Winnipeg and Chicago respectively. Additional reporting for Reuters by Sam Nelson and Julie Ingwersen in Chicago.