Grains dive on improved forecast
U.S. corn and soybean futures tumbled Tuesday on improved weather outlooks for the crops.
Near-term corn futures fell nearly 6%, and soybean prices slipped 2%, as forecasts for later this month showed cooler temperatures and some rain in key growing regions.
Less-threatening weather, coupled with swift plantings and higher-than-expected ratings for U.S. crops, made investors' bullish bets on corn and soy futures less appealing.
"It's all about weather at this point," said Don Roose, president of brokerage U.S. Commodities in West Des Moines, Iowa.
- See more on the weather: Rain chances rising
- Discuss Tuesday's trade in Marketing Talk
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Soy and grain prices had climbed in the past week, bolstered by forecasts for hot, dry weather. Crop yields are uncertain this early in the growing season, but the forecasts Tuesday looked more appealing for U.S. production.
"The markets are moving like an accordion, back and forth as weather forecasts shift from day to day," Roose added.
Volatility remains high, as large output is needed for corn and soybeans to rebuild dwindling inventories in the face of strong global demand.
"The expectations are still there for hot, dry weather looking out over the next seven days" for regions including the southern Plains and the southern and eastern Midwest, said Mike Palmerino, a meteorologist at private forecaster Telvent DTN.
However, during the middle-to-latter part of next week, he said, some cooler temperatures and some rain will provide relief in those areas, he said. "That certainly would be beneficial for corn and soybeans," he said.
Heavy selling by managed funds accelerated the slide in prices Tuesday, which indicated that investors were reducing exposure in risky positions.
Corn futures had rallied 9% since May 11 on weather threats to developing crops and strong demand. "Tuesday's drop in prices turned investors' positions established during corn's prior rally into losers," said Shawn McCambridge, senior grains analyst with Jefferies Bache in Chicago.
A favorable start to the growing season is not indicative of where crops will be in two months, but investors have to respect that potential, he said.
CBOT July corn closed 36 cents, or 5.7%, lower at $5.97 a bushel. July soybeans dropped 30 1/4 cents, or 2.1%, to $13.82 1/4.
U.S. wheat futures slumped along with corn and soy, fueled by traders booking profits on a recent surge in prices. The declines were also aided as concerns about dryness in the U.S. Plains and other key world wheat regions eased.
CBOT July wheat ended 18 1/2 cents lower at $6.85 1/2 a bushel, and KCBT July wheat dropped 13 1/2 cents to $7.01 1/2.
-By Andrew Johnson Jr., Dow Jones Newswires; 312-347-4604; Andrew.firstname.lastname@example.org