U.S. grains sag in 2013; soy drops to one-month low

U.S. soybean futures fell to the lowest level in a month on Tuesday on end-year liquidation and improving prospects for a bumper South American crop, traders said, and ended the year down more than seven per cent.

Corn slipped to a two-week low and tumbled nearly 40 per cent for the year, its biggest annual slide on record, as a record-large U.S. harvest replenished global inventories following a historic Midwest drought in 2012.

Wheat prices closed higher after the spot contract on the Chicago Board of Trade dipped below US$6 a bushel for the first time in more than 19 months, pressured by ample world supplies.

At the CBOT, most-active March soybeans settled down 16-1/4 cents at $12.92-1/2 per bushel. March corn ended down 1-1/2 cents at $4.22 a bushel, and March wheat finished up 4-3/4 cents at $6.05-1/4 (all figures US$).

Soybeans tumbled ahead of the New Year’s Day holiday as much-needed rains fell in crop areas of Argentina. Beneficial rains also fell in Brazil, where the harvest of a likely record-large soybean crop is under way in a few areas.

Argentina should harvest 55 million tonnes of 2013-14 soy, above the previous year’s production of 48.3 million tonnes, on an increase in the area planted with the oilseed, the Rosario exchange said in a report on Monday.

Prospects for rising global soy inventories have hung over a soy futures market that has been propped up by firm U.S. cash values amid robust demand from China, the world’s biggest soy buyer.

“South American weather is easy, and there is not a lot of trade,” said Dan Basse, president of AgResource Co. in Chicago.

“It’s worth noting that the soybean-corn (price) ratios are out to record highs. Everybody sees the bear market in corn and wheat, and they see soy as over-valued,” Basse said.

Soymeal posted the day’s biggest percentage losses at the CBOT, pressured by falling cash prices for dried distillers grains (DDGs), a corn byproduct that competes with soymeal as a protein source in animal feed.

The U.S. cash market for DDGs plunged in the last week, since China rejected two U.S. cargoes of the feedstuff after detecting the presence of a genetically modified strain not yet approved by Beijing.

As a result, U.S. supplies of DDGs are starting to build.

“The back-up of DDGs in the United States is going to cause some pressure and likely will affect meal prices also,” Basse said.

Corn came under pressure this week after crop-friendly rain fell over much of Argentina’s corn- and soybean-growing region over the weekend, and more rain is expected in the northern two-thirds of the country.

“Rains in Argentina have pressured the price of corn and soybeans… New rains are expected in Argentina this week, thus limiting the impact of high temperature on crops,” French analysts Agritel said in a market note.

Wheat posts biggest annual drop since 2008

Wheat edged higher on Tuesday on short-covering after falling to its lowest level since May 2012. CBOT wheat finished the year down 22 per cent, its biggest slide since 2008, while spot wheat in Paris fell around 16 per cent.

Dealers said rising global stocks weighed on values.

Commodity funds hold a large net short position in wheat, leaving the market vulnerable to short-covering at year’s end.

Bitter cold temperatures in roughly the northern half of the U.S. Midwest this week may cause some wheat winterkill in areas that do not have a blanket of insulating snow.

“We’ll definitely see an uptick in icing on rivers, and some wheat in west central Illinois and northeast Missouri may see some winterkill,” said Don Keeney, meteorologist for MDA Weather Services.

Keeney said Midwest temperatures would fall to 0 F (-18 C) or a few degrees colder by New Year’s Day. A slight weekend warm-up should be followed by another round of extremely cold air next week.

– Julie Ingwersen is a Reuters correspondent covering ag commodity markets from Chicago. Additional reporting for Reuters by Nigel Hunt in London, Colin Packham in Sydney and Michael Hogan in Hamburg.