U.S. grains: Soybeans extend drop on China defaults; corn, wheat sag

Chicago | Reuters — U.S. soybeans fell for a second straight session on Friday, dropping further below an eight-month high touched earlier in the week, as Chinese importers’ defaults on purchases of the oilseed weighed on prices.

Corn and wheat ended lower after a choppy session, pressured by slowly improving corn-planting weather in the Midwest and some upcoming showers expected in the drought-hit U.S. Plains wheat belt.

At the Chicago Board of Trade, May soybeans settled down 19-1/4 cents at $14.63 a bushel, but held above chart support at $14.60 (all figures US$). The contract has not settled below $14.60 since late March.

The May hit a life-of-contract high at $15.12 on Wednesday, the loftiest spot price since July 23.

The selloff in soybeans was triggered after Reuters this week reported that Chinese importers defaulted on at least 500,000 tonnes of U.S. and Brazilian soybean cargoes worth around $300 million — the biggest in a decade — as buyers struggled to get credit amid losses in processing beans.

China is by far the world’s largest soybean buyer.

“All this suggests that high prices for old-crop beans are not supported, when our best buyer is defaulting on purchases,” said Helen Pound, senior commodity specialist with KCG Futures.

Commodity funds hold a net-long position in CBOT soybeans, leaving the market vulnerable to bouts of long liquidation.

“We still have the funds long 177,000 contracts, which is way more than they usually have coming into planting. They are fat by about 70,000 lots,” said Sterling Smith, futures specialist with Citigroup in Chicago.

The soybean selloff erased gains seen earlier in the week after the USDA pegged U.S. ending stocks at a 10-year low.

For the week, soybeans fell 0.7 percent, after rallying in eight of the previous nine weeks amid tightening U.S. supplies.

Traders will monitor China’s GDP, retail sales and industrial activity figures due next week for indications on the health of the world’s No. 2 economy.

Corn hovers near $5

CBOT May corn settled down 2-3/4 cents at $4.98-1/2 a bushel as traders assessed weather forecasts for the U.S. Midwest, where spring seeding has been slow to start.

Forecasts called for widespread showers starting Sunday and frost early next week, meteorologists said. But fieldwork should resume in the second half of next week as the rains end and temperatures moderate.

“We will be making some planting progress once we get past Tuesday,” said Kyle Tapley, a meteorologist at MDA Weather Services.

USDA said it expects to release its first U.S. corn planting progress figures of 2014 on Monday.

For the week, May corn fell 3-1/4 cents, after rising for the previous two weeks.

Corn had underlying support from inter-market spreading, with traders buying corn and selling soybeans.

Wheat ends lower; chart support holds

CBOT May wheat ended down two cents at $6.60-1/4 a bushel, just above chart support at its 200-day moving average.

The market was pressured by forecasts calling for storms in the southern U.S. Plains that could bring at least some relief to drought-stressed crops. Light, scattered showers expected on Sunday will not offer much precipitation, but a second storm system late next week might offer wider coverage.

“The main chance for them is next week, around Thursday and Friday. But the models remain horribly in disagreement,” said Joel Widenor, a meteorologist with the Commodity Weather Group.

“Our thinking is the best chances for rainfall are probably going to focus on the eastern two-thirds of Kansas, Oklahoma and Texas,” Widenor said.

The market had little reaction, however, to news that Egypt, the world’s top wheat importer, bought 230,000 tonnes of Russian, Romanian and Ukrainian wheat for shipment May 1-10.

— Julie Ingwersen is a Reuters correspondent covering ag commodity markets from Chicago. Additional reporting for Reuters by Colin Packham and Sybille de La Hamaide.

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