U.S. corn futures fell for a third consecutive session and hit a three-week low on Thursday as harvest of what looked like a record-large U.S. crop accelerated amid scattered reports of stronger-than-anticipated yields.
Soybeans touched a two-week low on spillover pressure from corn, but prices rebounded as a slightly rainier Midwest weather forecast failed to soothe concerns about diminished yield prospects following an abnormally dry August.
"The threat of new-crop production not meeting demand is legitimate and the trade is running up the bids and putting some premium back in the market," said Karl Setzer, grain solutions team leader at MaxYield Cooperative.
Many areas of the western Midwest have received only minimal precipitation in recent weeks and updated data from the National Drought Mitigation Center showed drought expanding in key production areas such as Iowa and Minnesota.
The impact on corn production was limited as much of the crop was nearing maturity, but soybeans, which are in dire need of moisture to fill pods, may lose production potential.
Midwest rainfall was expected to be spotty until the weekend, followed by scattered showers in the central and northwestern Midwest, said Commodity Weather Group meteorologist Joel Widenor.
"Relief to the most notable dry areas in Iowa and Illinois should remain limited, but the Dakotas and central Minnesota will see some improvement," he said.
There is a better chance for light rains next week, but still about 40 per cent of the Midwest soybean areas remain dry.
Weekly government drought data showed expanding dryness mostly in the western Midwest. Nearly two-thirds of Iowa, the top corn and soybean state, was experiencing moderate drought or worse as of Tuesday, versus less than a fifth a month earlier.
Chicago Board of Trade November soybeans rose 15 cents, or 1.1 per cent, to $13.67-1/2 a bushel after sinking to $13.35, the lowest since Aug. 23. Lightly traded September gained 25-1/4 cents, or 1.8 per cent, to $14.23 a bushel (all figures US$).
Analysts have been reducing their soy production projections following hot and dry weather in August, the most critical month for the oilseed.
Commodity brokerage INTL FCStone late on Wednesday pegged the average U.S. soybean yield at 41.2 bushels per acre and a Reuters poll of 21 analysts found an average yield view of 41.095 bu./ac.
"Basically, anything under 42 and we're going to have to ration," Setzer said.
Corn continued its downward slide as reports circulated of well-above-average yields from early harvested fields.
CBOT December corn fell 8-1/2 cents, or 1.8 per cent, to $4.61 per bushel, the lowest for the contract since Aug. 16.
The contract has shed more than four per cent in three days.
Wheat futures followed corn lower, pressured also by sluggish export demand and abundant global supplies.
CBOT December wheat fell six cents, or 0.9 per cent, to $6.40-1/4 a bushel, just above the contract low of $6.35-1/2 posted three weeks ago. It was the contract's seventh straight daily decline.
Commodity funds were net sellers of an estimated 7,000 corn and 1,000 wheat contracts but net buyers of 8,000 soybean contracts on the day, trade sources said.
-- Karl Plume reports for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris, Colin Packham in Sydney and Sam Nelson in Chicago.