U.S. soybean futures fell to a one-week low on Thursday as some weather models predicted rains in Argentina's crop belt, but the market pared losses late in the session on rumours that China was booking fresh soy purchases.
Corn rallied to close higher as cash markets firmed and consumption from the U.S. ethanol sector improved slightly. But wheat slid for a third consecutive session amid a lack of news.
At the Chicago Board of Trade (CBOT), the March soybean contract settled down 1-3/4 cents at $14.35-1/4 per bushel after dipping to $14.15, its lowest level since Jan. 16. The November soybean contract, representing the 2013 U.S. soy harvest, settled up 1-1/4 cents at $13.05-3/4 (all figures US$).
March corn ended 3-1/2 cents higher at $7.24-1/4 a bushel, while March wheat was down 6-1/4 cents at $7.68-1/2/bu. after falling to $7.63, its lowest level since Jan. 14.
Uncertainty about crop weather in Argentina dominated the soy complex. Farmers in Argentina, the world's No. 3 exporter of soybeans and corn, are starting to worry that this season's crops may suffer from dry conditions after more than a month of consistently hot and sunny weather.
The main U.S. weather forecasting model calls for welcome rains in Argentine crops areas in early February, but the European forecasting model projected dry conditions for the same period.
"Going home, we paid attention to the European model and said, 'If it's not going to rain in Argentina, I don't want to be short'," said Dan Basse, president of AgResource Co. in Chicago.
Additional support stemmed from talk that Chinese buyers were buying more U.S. soybeans for the 2013/14 marketing year, in the wake of a large sale confirmed by the U.S. Department of Agriculture. Private exporters reported sales of 510,000 tonnes of U.S. soybeans to China and 113,000 tonnes to unknown destinations, USDA said Thursday.
"The Chinese have positive crush margins. I think there are a lot of Chinese (buyers) trying to secure new-crop beans because of positive margins," Basse said.
Corn ends higher
Corn closed higher on strong cash markets, which helped front-month CBOT March corn to gain against the May contract on spreads. March corn settled at the same price as May, after settling at a two-cent discount to the May on Wednesday.
Analysts said demand for corn has improved among livestock feeders because a slowdown in the pace of U.S. ethanol production in recent weeks has raised the cost of dried distillers grains (DDGs), a byproduct of ethanol production that competes with corn as an ingredient in feed rations.
"The ethanol grind has slowed down and DDGs are trading at a premium to corn," said Joe Christopher, a grain merchandiser at Crossroads Co-op in Sidney, Nebraska.
U.S. ethanol production rose one per cent in the latest week, to 792,000 barrels per day, the U.S. Energy Information Administration said, rebounding from a 2-1/2-year low the previous week at 784,000 barrels per day.
"The numbers are kind of weak, but they did bounce back. I think what it says is that the ethanol margins improved in the last week," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.
Wheat continued to slide after hitting a one-month high on Tuesday, tracking losses in soybeans and corn futures even though the U.S. winter crop was suffering from a lack of moisture.
Fundamental news was scarce. U.S. weekly export sales figures will be published on Friday, one day later than usual due to this week's federal holiday.
"There will be some light rain this week in wheat country but it will miss the driest areas in the west," said Andy Karst, meteorologist for World Weather Inc.
Drought deepened in Kansas over the last week, further jeopardizing this season's production of winter wheat, according to the weekly U.S. Drought Monitor issued Thursday by a consortium of federal and state climatology experts.
-- Julie Ingwersen is a Reuters correspondent covering agricultural commodities markets in Chicago. Additional reporting for Reuters by Michel Rose and Valerie Parent in Paris and Naveen Thukral in Singapore.