U.S. grain and soy futures fell sharply Thursday on broad commodity weakness and an improved Argentina weather forecast that eased concerns about the crop there.

The declines were driven by a widespread risk-off trade in commodity markets, with sharp declines witnessed across energy and grain futures. The dollar's surge against the euro weighed on grains generally, with traders taking profits after sharp recent gains, helping extend the losses.

Wheat futures led the declines, slumping to two-week lows. Wheat came under pressure from profit-taking, as the absence of fresh supportive news and ample world supplies left traders without a reason to support prices seen as overbought.

Wheat prices had rallied in previous weeks, after South America weather concerns buoyed corn and soybeans. Wheat is a competitor to corn in feed grain markets, so advancing corn prices push wheat prices as well.

Sluggish export demand and ample world wheat supplies serve as underlying bearish factors, particularly with U.S. hard red winter wheat crop condition ratings improving, according to analysts at Doane Advisory Service in St. Louis, MO.

Corn and soybean futures fell sharply as well, fueled by traders reducing risk premium that had been built into prices related to Argentina dryness.

Forecasts calling for rain showers to move into parched areas of Argentina next week were enough to encourage traders to reduce some risk exposure in the markets.

The rain is welcome news for desiccated corn fields and the soy crop, which is showing signs of stress.

"The expected rains will not only allow us to maintain our Argentina planting forecast, but also bring relief to a large part of the central farming belt, where early plantings will start to enter a critical stage that will determine crop yields during the next seven to 15 days," the Buenos Aires Cereals Exchange said Thursday.

Argentina is the world's No. 3 soybean exporter behind Brazil and the U.S., and the leader in global exports of soymeal and soyoil. The South American nation is also the No. 2 corn exporter.

CBOT March wheat ended down 3.2% at $6.29 1/4 a bushel, while the MGEX March contract slipped 2.4% to $8.18 1/2 and KCBT March tumbled 3.9% to $6.86.

CBOT March corn ended down 15 cents, or 2.3%, at $6.43 1/2 a bushel. CBOT March soybeans dropped 21 cents, or 1.7%, to $12.09 a bushel.

Other Markets

CBOT March soymeal ended down $7.40 at $313.20 per short ton; March soyoil fell 0.97 cent to 52.06 cents per pound. CBOT March rice ended down 11 1/2 cents, to finish at $14.53 1/2 per hundredweight.

Ethanol for January delivery ended down 1.9% at $2.185 per gallon. Oats for March delivery finished down 3 cents at $2.90 a bushel.

-By Andrew Johnson Jr., Dow Jones Newswires; 312-347-4604; Andrew.johnsonjr@dowjones.com
--Ken Parks contributed to this article.
(END) Dow Jones Newswires
January 05, 2012 16:36 ET (21:36 GMT)
DJ US GRAIN AND SOY REVIEW: Fall On Broad Commodity Selling, Argentina Forecast->copyright