U.S. grains: Wheat sags as rains target Plains; soy hit by defaults

Chicago | Reuters — U.S. wheat futures fell one per cent on Thursday on wetter forecasts for parts of the drought-hit southern Plains wheat belt as well as disappointing weekly export sales data, traders said.

Soybeans sagged as Chinese defaults on purchases of U.S. and Brazilian soybeans triggered a fresh round of profit-taking, one day after the market set an 8-1/2-month high.

Corn fell on technical selling but pared losses amid concerns about potential U.S. planting delays.

At the Chicago Board of Trade, May wheat settled down 6-3/4 cents at $6.62-1/4 a bushel, while KC May hard red winter wheat, the type grown in the Plains, dipped to a one-month low of $7.19-3/4.

CBOT May soybeans fell 13 cents to $14.82-1/4 a bushel and May corn ended down 1 cent at $5.01-1/4 a bushel.

Wheat fell amid forecasts calling for increased rains in the southern Plains production belt next week, including central Kansas, a core production area.

“We’ve got a wetter weather pattern developing. That has helped increase the fundamental pressure of yesterday’s negative USDA report,” said Mike Zuzolo of Global Commodity Analytics in Atchison, Kansas.

He was referring to the U.S. Department of Agriculture’s monthly supply/demand report, in which the government raised its forecast of 2013-14 world wheat inventories above a range of trade expectations.

Additional pressure came from USDA’s weekly export sales report on Thursday, which pegged sales of U.S. wheat in the latest week at 41,800 tonnes, below trade expectations and a low for the 2013-14 marketing year.

Soybean defaults

The selloff in soybeans followed a two-session rally that lifted front-month May to a life-of-contract high on Wednesday above $15 a bushel.

Defaults by buyers in China, which imports 60 per cent of the soybeans traded in the world, are expected to cap global prices as they coincide with bumper supplies from Brazil and Argentina hitting the market.

Chinese importers have defaulted on at least 500,000 tonnes of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as they struggle to get credit amid losses in processing beans.

However, concern about tightening U.S. soybean supplies continues to underpin CBOT futures.

“You’ve got all the rhetoric out there about Chinese cancellations rolling forward. But on the other side of the coin, beans are still tight in this country,” said Tom Fritz, a partner at EFG Group in Chicago.

Acknowledging robust demand for U.S. soy, particularly from exporters, USDA on Wednesday lowered its forecast of U.S. 2013/14 soybean ending stocks to 135 million bushels, which would be a 10-year low if realized at the end of the marketing year on Aug. 31.

“Futures are pricing in a potentially very tight summer situation in the U.S. soybean market, and there’s no clear path on getting it resolved yet,” said Rich Feltes, vice-president for research at R.J. O’Brien.

Despite Thursday’s declines, CBOT May soybeans were still on track for a fourth straight weekly gain.

“It’s a pretty impressive performance given that negative news,” Feltes said.

In corn, the spot May contract briefly dipped to $4.94 a bushel but quickly bounced back above psychological support at the $5 mark.

Traders have been closely monitoring weather forecasts for the U.S. Midwest, where corn planting has been slow to start due to unusually low soil temperatures after a brutal winter. Rains threatened to stall fieldwork next week, especially east of the Mississippi River.

Seeding is under way in the far southern reaches of the Corn Belt, but has barely begun in core states like Iowa and Illinois.

“Until you get planters rolling, and I mean really rolling, the corn market is going to be biased to move higher,” Fritz said.

— Julie Ingwersen is a Reuters correspondent covering agricultural markets from Chicago. Additional reporting for Reuters by Christine Stebbins in Chicago, Shadi Bushra in London, Naveen Thukral in Singapore and Colin Packham in Sydney.


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