Wheat slips 1pc, corn faces harvest pressure

CHICAGO: US grain futures sagged on Wednesday after an early rally fizzled out even as the stock market and oil futures surged, with wheat slipping 1 percent on bigger-than-expected supplies in Canada.

Corn futures, which rose early to extend overnight gains after a decline in the crop's condition ratings, fell on pressure from the fast-approaching harvest in the Midwest which has begun to break prices in the cash markets.

Investors were also cautious in making new bets in grains ahead of the US Department of Agriculture's supply-demand report on Monday which will update the agency's corn and soybean crop forecasts.

"People are complaining about poor demand, and we've got harvest right in front of us. That is a tough time to rally the market," said Dan Cekander, analyst with Newedge USA in Chicago.

At the Chicago Board of Trade, benchmark December wheat futures ended down 8-1/2 cents at $7.51-1/2 per bushel after Statistics Canada reported July 31 Canadian all-wheat stocks at 7.19 million tonnes, down from 7.83 million a year earlier but above the average trade estimate of 6.2 million.

A reminder of poor export demand for US wheat added pressure. Egypt, the world's largest wheat importer, on Wednesday bought 300,000 tonnes of Russian and Kazakh wheat at a tender in which no US wheat was offered.

"(The United States) didn't even participate in the Egyptian tender, to show you how confident we are in that business," said Shawn McCambridge, analyst with Jefferies Bache in Chicago.

Egypt has bought wheat supplies for shipment into late November, close to the arrival of fresh new-crop supplies from Australia that will compete for business with US wheat.

"That window of opportunity before the Southern Hemisphere comes on line continues to narrow," McCambridge said.

However, trading volume in CBOT wheat trailed soybeans and corn. CBOT wheat volume totaled only about two-thirds of its 30-day average. Corn volume was down about 25 percent while soybean volume was up 16 percent.

November soybeans fell 1-3/4 cents to $14.20-3/4 per bushel while December corn ended down 7-3/4 cents at $7.48.

Corn and soy rose early on a mix of bullish factors, including a 3 percent rise in US crude oil futures, a rally on Wall Street and the first decline in the US dollar in seven trading sessions.

US corn and soybean condition ratings declined in USDA's latest weekly report, a factor that helped lift values in early Globex trade. And Cropcast, a closely watched weather-forecasting service, came out with estimates of the US corn and soybean crops that fell below USDA's latest projections.

But none of those factors was able to help CBOT grains sustain the early rally.

"I think we are tired of hearing survey results. The market wants to see harvest. They want to see USDA on Monday," Cekander said.

ABN AMRO analyst Charlie Sernatinger added, "The (cash) basis levels tell you there is no demand around here."

Cash basis values for corn and soybeans have fallen in recent days at US Gulf export terminals as well as in the Midwest interior.

At the Gulf, the spot soybean basis is at its lowest level since the spring of 2008, reflecting poor demand for US soybeans due to competition from South America -- even as the US soybean harvest nears.

The spot corn basis at the Gulf is at its lowest level since mid-March

Copyright Reuters, 2011