US corn trims gains after rally on dry Argentina

PARIS/SINGAPORE: US corn and soybean futures turned lower on Thursday, consolidating after hitting their highest levels in more than a month due to concerns that dry weather could harm harvests in major producer Argentina.

Argentina's corn and soy crops are crucial for replenishing tight global supply and dry conditions have made traders nervous about potential yield losses.

Dry weather is starting to threaten soybean yields in parts of Argentina's main crop belt, the Buenos Aires Grains Exchange said on Wednesday, adding rain was needed in the short term to prevent the risk of irreversible damage.

"Prices are being driven up by the drought in the growing areas in Argentina, which is making crop shortfalls likely," Commerzbank analysts said a note.

"Alongside the drought-related harvest shortfalls in Argentina, the supply of corn and soybeans could also be hit in the short term by infrastructural problems in Brazil."

After corn hit a new seven-week high and soy a fresh six-week peak earlier on Thursday, technical resistance levels and the absence of fresh weather news encouraged the pause in the rally, traders said.

Chicago Board of Trade March corn inched down 0.1 percent to $7.39-3/4 by 1307 GMT, off an earlier high of $7.44-1/2. March soybeans fell 0.7 percent to $14.68-1/2 a bushel, below an earlier high of $14.84-1/4.

"We need to have more information to feed the bull market or it will run into some sort of resistance," said one Melbourne-based analyst who declined to be identified.

Soybeans were also underpinned by strong demand from top importer China and worries that port congestion in Brazil will hamper the export of an expected record harvest.

US wheat futures tracked corn lower, with March wheat edging down 0.4 percent to $7.84-1/4 a bushel.

The wheat market was concerned about a relentless drought across the US Plains.

Export demand at a time of low supply in several major exporters like Russia and Argentina is also supporting wheat prices.

Dwindling supply and soaring prices in Russia after a poor crop last year have led the government to consider cutting an import tariff, raising the prospect of extra demand.