SINGAPORE: Chicago wheat futures lost more ground on Tuesday, taking the declines in two sessions to nearly 5 percent as slowing demand and improved crop weather in the United States continued to hammer the market.
Soybeans lost around 1 percent, falling for a second day as outlook for a better crop in South America weighed on the market amid expectations that the US Department of Agriculture later this week will raise its forecast of ending stocks for the first time in 11 months.
"The main thing that we see is that investor demand in wheat has moderated," said Abah Ofon, an agricultural commodities analyst at Standard Chartered Bank.
"Buying spree has decelerated and the important thing is that the wheat crop is going to see improvement in supply in 2011."
Chicago Board of Trade May wheat fell 1 percent to $7.92-1/2 a bushel by 0347 GMT. CBOT May corn lost 0.7 percent to $7.12-1/4 a bushel and May soybeans fell 1 percent to $13.82 per bushel.
The US Agriculture Department (USDA) reported wheat export inspections of 21.44 million bushels on Monday, near the low end of forecasts, which the trade viewed as evidence that export demand for US supplies would slow after a surge in February.
Unrest in the Middle East had boosted world demand for wheat during February but traders said the political upheaval, could start to weigh on the world economic recovery.
US oil futures eased from a two-and-a-half year high and the euro stalled on Tuesday, while Asian stocks remained under pressure as investors fretted that higher energy prices would stunt the global economic recovery.
An improved crop outlook in the US also weighed on the wheat futures. Rain and snow in the US Plains this week are likely to ease stress on the winter wheat crop, which has been suffering from drought although the driest spots will see little relief, a forecaster said.
In the soybean market, pressure emanated from forecasts of large crops from Brazil and Argentina, which were earlier estimated to produce less due to a drought.
Informa Economics on Friday raised its estimate for 2010/11 Brazilian soy production to 71.4 million tonnes from its previous outlook for 69.3 million.
Argentine soy production was pegged by Informa at 52.0 million tonnes, up from the previous outlook for 49.0 million.
"I don't think soybeans are in same positions as corn where stocks are incredibly tight," said Ofon. "We are seeing crops in Latin America improving and that was the main concerns, now there have been good rains in Brazil and Argentina."
For the first time in 11 months, USDA is expected to raise its forecast of US soybean ending stocks, due a slowdown in domestic usage. USDA has cut its estimate or left it unchanged each month since it released its first forecast of 2010/11 soy ending stocks last May.
But near relentless demand for corn from exporters, feeders and ethanol makers despite higher prices continues to chip away at America's corn stockpile, dropping the ending supply for 2010/11 to the lowest in 15-years.
USDA was scheduled to release its March supply/demand reports on Thursday.
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