Prices drop after rally in positioning before USDA report

HAMBURG: Chicago wheat, corn and soybeans fell on Friday in a limited pullback after their sharp weather-driven rally this week as the market awaited a closely-watched US Department of Agriculture (USDA) global supply report.

Prices surged this week on fears that hot and dry weather in US grain belts could stress crops but attention is now turning to the USDA's World Agricultural Supply and Demand Estimates (WASDE) due at 1600 GMT on Friday.

Chicago Board of Trade most-active July corn was down 0.7 percent at $3.83 a bushel at 1058 GMT after touching $3.91-3/4 on Thursday, the highest since June 2016 on fears about bad US crop weather.

Chicago July wheat was down 0.8 percent at $4.45-1/4 a bushel. Wheat surged this week on worries about hot and dry weather stressing crops in the US Plains and Midwest, which caused Minneapolis spring wheat to touch a near two-year high of $6.17-3/4 on Thursday.

But Minneapolis July spring wheat was unchanged at $6.04-1/4.

July soybeans fell 0.1 percent to $9.36-1/2 a bushel.

"There is a pullback in wheat, corn and soybeans today after the recent strong rises as the market positions itself for the USDA report later today," said Graydon Chong, senior commodity analyst with Rabobank. "There is still intense attention on dry, hot weather in U.S grain belts which could cause problems for crops, but with a little rain forecast in the Midwest."

"But much will depend on exactly how much rain actually falls and in which areas. The concern about wheat quality in the US continues to keep higher protein Minneapolis spring wheat at considerably wider spreads than normal today."

Traders are awaiting the USDA global supply/demand estimates for factors including signs whether springtime snowstorms damaged US wheat crops, global corn and soybean harvests and the latest indication of grain and soybean inventories.

"Markets will be watching the USDA report for any changes to the world supply outlook," Chong said. "There could be changes to estimates of US season-ending stocks for the 2016/17 season through changes to US domestic and export demand estimates. Changes to global figures could also include an upward revision for Chinese soybean imports."

Falls in soybeans on Friday were limited by strong demand, especially from Asia.

Imports of soybeans to China rose in May by 25 percent on the year to the highest on record. Pakistan has also bought half a million tonnes of soybeans in past days.