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Profit-taking emerges on damp forecast

07/17/2012 @ 3:07pm

U.S. grain and soybean futures closed mixed Tuesday, succumbing to profit-taking pressure on improved crop weather outlooks.

Investors took some profits off the table after the recent rally in futures. Corn and soybean futures had previously rallied to or near historic highs in the last three weeks, due to worries about declining yield and supply potential resulting from the worst Midwest drought since 1988.

Weather forecasters calling for rain to move into parched areas of the corn belt at midweek forced traders to take a cautious approach.

"At these price levels, rain will go a long way in impacting traders' comfort levels," said John Kleist, analyst with advisory and brokerage firm ebottrading.com.

The possibility that rain could move into some drought-stricken crop areas, coupled with demand slowing from higher prices, takes some edge off the bullish argument in the market, Mr. Kleist said.

Weather remains a threat to yield potential across the corn belt, but after a sharp rally, many traders saw weather threats as already factored into values.

"A little rain will move into some of the driest areas of the corn belt at midweek," said Mike Palmerino, meteorologist at Telvent DTN Weather in Boston.

"Dry areas of the southern and eastern Midwest have the best chances of rain moving south and east from the northern plains. The current weather pattern is not as dry for the southern and eastern corn belt in the six-to -0-day forecast," Mr. Palmerino added.

Yet, U.S. corn crops remain threatened by dryness, and if weather patterns don't produce needed rains through the end of the month, concerns about soy crops will heighten.

"I'm not pretending that the rains will save the corn crop, but it could stabilize the crop," Mr. Kleist said. "With rain in the forecast attention turns to demand, and with corn demand slower at higher prices, the bullish argument losses some steam," Mr. Kleist added.

Separately, soybeans ended mixed, with rain forecasts applying modest pressure, while tight supply forecasts provide underlying support. Wheat futures ended higher, supported by early advances in corn and worries about tighter world supplies. Overnight, Kazakhstan's agriculture ministry said the country's grain harvest this year is likely to be 14 million metric tons, compared with nearly 29.7 million tons in 2011, due to drought.

CBOT December corn ended down 1 1/4 cents or 0.2% to $7.1 1/4, November soybeans ended unchanged at $15.90 1/2.

CBOT September wheat rose 1/2 cent or 0.06% to $8.85, September KCBT wheat closed 8 1/2 cents or 1% higher to $8.93, and MGEX September wheat settled up 2 3/4 cents or 0.3% at $9.85 3/4.

-Write to Andrew Johnson Jr. at andrew.johnsonjr@dowjones.com
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(END) Dow Jones Newswires
July 17, 2012 15:55 ET (19:55 GMT)
DJ US GRAIN AND SOY REVIEW: Profit Taking Emerges On Wetter Forecast->copyright

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