U.S. soybeans ended marginally higher on Tuesday after a seesaw session which saw talk of end-user demand and a weaker dollar lend support, though gains were limited by an advancing Midwest harvest and accounts of good yields.
Futures rebounded from six-week lows in Asian trading and kept the momentum into the Chicago session up to midday when the benchmark November contract turned negative. But a modest spate of buying near the close nudged prices back into the black.
When prices eased, grain companies took the opportunity to cover their short positions and even make some outright purchases on expectations that U.S. supplies will be tight in the months to come.
"Farmers are going to hold on to their beans, and it could get tight between now and February," said Gerry Gidel, chief feedgrain analyst at Rice Dairy LLC in Chicago.
Soybean exports from South American agricultural powerhouses Brazil and Argentina typically start in the first quarter of the year, and until then end-users have to depend on U.S. supplies.
Data from the U.S. Department of Agriculture showed that exporters have already sold nearly 75 per cent of the 28.71 million tonnes of soybeans projected for overseas sales in the 2012-13 season, with 11 more months to go.
But anecdotal accounts of soybean yields surpassing expectations after the worst drought in half a century have given the market a bearish tone in recent weeks. Prices have slumped 10 per cent from their peak of $17.94-3/4 set on Sept. 4 (all figures US$).
On Monday, the November soybean contract fell below $16 per bushel for the first time in 11 weeks.
"Beans in the northern part (of the Midwest) seem to be great," said Jack Scoville, vice-president of Price Futures Group.
Prospects of big crops in Brazil and Argentina, concerns of slowing demand from China and the U.S. soybean crush coming in lower than expected last month have been weighing on the market.
Chicago wheat futures erased gains posted during Asian trading to turn lower amid forecasts for rain in the U.S. Plains as seeding of the winter crop advanced. Liquidation of long positions tied to slow export demand also pressured prices.
Egypt seeks wheat
After futures trading closed, Egypt's state-run General Authority for Supply Commodities (GASC) set a tender to buy an unspecified amount of wheat for Dec 1-10 shipment. The agency has bought a large amount of Russian wheat over the past month.
The wheat market is expected to remain volatile amid persistent speculation that Russia could curb exports.
Wheat output from the world's second-largest exporter, Australia, may fall below 20 million tonnes in the 2012-13 season due to a dry spell across Western Australia, analysts said, which would further tighten global supplies and stoke prices.
A weekly USDA report on Monday showed that 25 per cent of the winter wheat crop had been planted as of Sunday, up from 11 per cent a week earlier but behind the five-year average of 27 per cent.
Corn futures ended slightly lower, weighed down by the rapidly advancing harvest and a pickup in farmer selling.
Traders were gearing up for Friday's U.S. quarterly grain stocks and wheat crop reports that could provide direction for markets that have been on the wane in terms of prices and trading activity, since drought led to record highs this summer.
Analysts polled by Reuters expect U.S. corn and soybean stocks as of Sept. 1 to be the lowest in eight years at the end of the 2011-12 season.
"The market is oversold," said Brian Hoops, president of Midwest Market Solutions, which caters largely to farmers. He said accounts were showing better-than-expected yields in the northern Midwest, which had rains in late August.
Chicago Board of Trade (CBOT) November soybeans rose 0.1 per cent to end at $16.11-1/2 a bushel, off the session high of $16.25-1/2 and low of $16.04-1/4. December corn was down 0.13 per cent at $7.43-3/4 per bushel, while December wheat fell 0.6 per cent to $8.86-1/2 per bushel.
Scoville said there was talk of end-user demand in soybeans but he could not confirm any sales or the identity of the buyers.
Rumours emerged that China was seeking or had bought several cargoes of U.S. soybeans, but export traders could not confirm any fresh purchases by the top importer.
Scoville also said harvest pressure on corn and soybeans could ease once farmers have cut three-quarters of the crops, but until then any rallies would be muted.
USDA on Monday said the corn harvest was 39 per cent complete as of Sept. 23, up from 26 per cent a week earlier. The soybean harvest rose to 22 per cent complete from 10 per cent.
Analysts had been expecting the corn harvest to be 41 per cent finished and the soybean harvest 20 per cent, according to the average of estimates in a Reuters poll.
-- K.T. Arasu writes for Reuters from Chicago. Additional reporting for Reuters by Sybille de La Hamaide in Paris and Naveen Thukral in Singapore.