Soybeans fell below US$16 a bushel on Monday for the first time in 11 weeks, as the harvest advanced at a record pace and investors worried about the economy fled to the dollar, but bargain buying pared losses from the session low.
The benchmark November soybean contract at the Chicago Board of Trade (CBOT) dropped to a session low of $15.90-1/4 a bushel in Asian trading (all figures US$). Prices rebounded sharply during the Chicago session but stayed at their lowest in six weeks.
The spot contract has tumbled just about 10 per cent in three weeks on profit-taking and investment portfolio balancing after the market set an all-time high of $17.94-3/4. Prices had soared as the worst U.S. drought in half a century devastated crops in the world's top grains exporter.
Prices remain up more than 12 per cent from the start of June, when the drought began lifting markets.
"There's been talk about huge South American production and major growth in palm oil supply," said Roy Huckabay, executive vice-president at the Linn Group in Chicago. "There was also some talk about palm oil replacing bean oil," he said.
CBOT corn futures also pared losses. So did wheat, which came under pressure from forecasts for rain this week in the U.S. Plains, where farmers are planting the winter crop.
Traders attributed the paring of losses in grains to short-covering, which coincided with the dollar index coming off its highs. The dollar typically has an inverse relationship with grain prices, with any strengthening of the currency raising costs for importers across the world.
After the market closed, the U.S. Department of Agriculture said 39 per cent of the corn crop had been harvested as of Sunday, just shy of trade expectations for 41 per cent. The soy harvest was 22 per cent done, below expectations for 20 per cent.
Price movements in soybeans remained the most active, as they were last week. Bulls lost ground despite projections by the U.S. Department of Agriculture for ending stocks to be the smallest in nine years next summer and the stocks-to-use ratio, a measure of demand, seen the tightest in five decades.
"We are seeing a flight to safety to the dollar and negative headwinds for physical commodities," said grains analyst Ken Smithmier of the Hightower Report in Chicago. "There have been better reports of yields and cash markets were softer."
November soybeans fell 0.7 per cent to close at $16.10, recovering from a session low of $15.90-1/4. December corn fell 0.5 per cent to finish at $7.44-3/4 a bushel, up from the low of $7.36-1/4, while December wheat lost 0.6 per cent at $8.92, up from a low of $8.83-1/4.
Soy crop getting bigger?
More analysts expect USDA to raise its estimate of the soybean yield in its next crop update on Oct. 11, based on stories of better-than-expected output so far in the harvest.
There is also pressure on soybeans on expectations for a big surge in plantings in Brazil and Argentina, the world's second- and third-largest exporters after the United States.
"Encouraged by current high prices, farmers throughout South America are expected to grow record crops," consultant Capital Economics said in a note on Monday. It expects demand from China, the world's top buyer, to remain subdued this year.
"Although China would have to increase its soybean imports at some point to replenish its reserves, we believe that this is likely to be delayed until the South American harvests become available," the economic research consultant said.
A slowdown in edible oil consumption, which sent palm oil to a two-year low, added to bearish sentiment in soybeans.
"Oilseed analytical firm Oil World expects global soybean demand to decrease by three million tons in the 2012-13 season. This is likely to be due in part to reduced use for animal feed and in part to lower use in biodiesel production," Commerzbank said.
Palm oil prices will fall further this year as slowing economic growth dents demand for biofuel production, leading to higher stocks at top producers Indonesia and Malaysia, industry executives meeting in India at the weekend said.
-- K.T. Arasu writes for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson in Chicago, Ivana Sekularac in Amsterdam and Naveen Thukral in Singapore.