WINNIPEG/CHICAGO: Wheat tumbled more than 2 percent and corn and soybeans eased off early highs on Thursday, when traders found little bullish news in a US government crop report.
World wheat stocks will swell to record size this year and corn stocks will be larger than expected despite crop-withering drought in South America, the US Department of Agriculture forecast on Thursday.
"Increasing world projected (wheat) carryout by almost 3 million tonnes, how ugly can it get?" said Tom Fritz of EFG Group in Chicago. "And I think that in turn weighs on corn prices."
Grains shrugged off news that Greece agreed to an austerity package in exchange for a bailout, which helped pump up crude oil 1 percent and nudged equities higher.
Chicago Board of Trade March wheat shed 14-3/4 cents or 2.2 percent to $6.46 per bushel, touching its lowest price since late January and extending a losing streak to three sessions.
Chicago corn for March delivery lost 5-1/2 cents or 0.9 percent to $6.37 per bushel, giving up a nearly one-month high.
Wheat felt additional pressure from unwinding of spreads against corn, traders said. Meanwhile, an earlier rally in corn prices was due to investors buying nearby corn and selling deferred months on tight cash supplies, Fritz said.
USDA said drought severely stunted South America's corn and soybean crops, although not quite as badly as expected, and the agency predicted larger US corn exports to fill the gap on world food markets.
The US corn stockpile looks to shrink this year to its smallest size in 16 years, down 5 percent from the previous forecast to 801 million bushels, but still slightly higher than traders had anticipated, USDA reported.
Despite choppy trading, some traders remained bullish with the full extent of crop damage in South America and from Europe's recent deep freeze unknown.
"The report was about as expected but some specs think USDA's numbers weren't cut enough and expect further cuts in the March report," said Paul Haugens, vice-president for Newedge USA.
March soybeans gave up 4 cents, or 0.3 percent, to $12.27-1/2 per bushel for their third straight loss. They came well off an earlier top of $12.47-1/2 per bushel, their highest point in nearly four months, weakened by corn's fall and technical selling.
For the second month in a row, USDA lowered its forecast of Argentina's corn and soybean crops. The corn crop was forecast at 22 million tonnes, down 4 million tonnes from the January estimate. Soybeans were forecast at 48 million tonnes, down 2.5 million tonnes in a month.
"High temperatures and extensive dryness ... resulted in irreversible damage to early corn," said USDA. Traders had expected a lower corn figure and a slightly higher soybean estimate.
The Buenos Aires Grains Exchange also cut Argentina's projected 2011/12 corn harvest to 21.3 million tonnes from 22 million tonnes due to drought, but left its soy production estimate unchanged at 46.2 million tonnes.
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