Grain futures tumbled in a wave of technical selling on Monday, with soybeans sinking to a four-and-a-half-month low that nearly erased gains from this summer's devastating drought.
Prices were already under pressure after the U.S. Department of Agriculture on Friday raised its estimate of U.S. soybean production more than expected and increased its forecast for global inventories.
Monday's technical selling pushed soybeans down 21 per cent from their all-time high set in early September. When a market drops more than 20 per cent over at least two months, it is considered to have gone beyond a correction and become a technical bear market.
The technical selloff spread to wheat and corn from the soybean market, where it began, said Jerry Gidel, chief feed grain analyst for Rice Dairy.
"Right now, it's 'get me out' time," he said.
Most-actively traded January soybeans fell 3.2 per cent to $14.05 a bushel on the Chicago Board of Trade. Front-month November soybeans lost 2.8 per cent to $14.11 a bushel (all figures US$).
Soybean futures began a rally linked to the worst U.S. drought in more than 50 years on June 15 at $13.86 per bushel and hit a record high of $17.94-3/4 on Sept. 4 as fears of dwindling supplies peaked.
But the USDA, in a monthly supply-demand report on Friday, told traders that crop losses from the drought were not as severe as previously thought.
The department pegged U.S. soybean production at 2.971 billion bushels, up from its October estimate of 2.86 billion and the 2.892 billion predicted by analysts.
"The soy complex is still reeling from the bearish U.S. yield implications and increase in world ending stocks," said Brian Hoops, president of Midwest Market Solutions.
Prices are likely to come under even more pressure moving forward, with expectations for near-record supplies from South America by March, analysts said.
Beneficial rains moved into the southern half of Brazil's top soy-producing state of Mato Grosso, boosting prospects for soybean planting and germination, according to local forecaster Somar.
Goldman cuts price forecasts
Following the USDA report, Goldman Sachs cut its three-month price forecast for soybeans to $15.50 from $16.50 and its six-month outlook to $17.25 from $18.75.
Speculators have exited the soy market recently amid improving optimism about inventories.
Large speculators cut their net long position in U.S. soybean futures by 4.7 per cent to an eight-month low as of Tuesday, unwinding bullish bets due to increasing supply forecasts, regulatory data showed on Friday.
"Risks of critically tight soybean inventories continue to fade quickly," Goldman said in a note.
On Monday, funds sold an estimated 8,000 soybean contracts, 18,000 corn and 6,000 wheat contracts, CBOT floor sources said.
Goldman cut its three-month forecast for corn prices to $8.25 a bushel from $9 and its wheat price forecast to $9.50 from $10.25.
December CBOT wheat fell 3.2 per cent to $8.57-3/4 a bushel, while December CBOT corn dropped 2.8 per cent to $7.18 a bushel.
Selling was "nearly all from the technical side," said Karl Setzer, grain solutions team leader for MaxYield Cooperative.
The drought-plagued U.S. hard red winter wheat crop in the Plains states faces a cold snap and more dry weather as it enters a winter dormancy stage of development, agricultural weather experts said Monday.
Still, the USDA on Friday raised its outlook for global wheat ending stocks to 174.18 million tonnes from the October estimate of 173 million tonnes. That was above the 170.969 million expected by analysts.
-- Tom Polansek reports on agriculture and the CBOT for Reuters from Chicago. Additional reporting for Reuters by Nigel Hunt in London, Naveen Thukral in Singapore, Colin Packham in Sydney, Michael Hogan in Hamburg and Valerie Parent in Paris.