Soybeans fell to a two-week low, shedding 2 percent as the US Agriculture Department unexpectedly raised its US crop production outlook by 1 percent in a monthly report, despite forecasts for a smaller crop due to hot, dry weather this summer.
Wheat fell for a fifth straight day, hitting a one-month low on the USDA forecast for a large increase in US and global ending stocks. It pared some of its losses when corn rebounded.
A firmer dollar and lower equities markets also hung over the grains markets and limited gains in corn as concerns deepened that Greece may default on its debts.
Corn reversed earlier declines as lower prices attracted commercial buying. Further support came from a midday weather forecast showing a colder weather pattern in key production areas of northern Iowa and Illinois and southern Minnesota which suggested a greater risk of freeze damage.
"The midday forecast going colder caught everybody's attention when you can't afford to lose a bushel from here forward," said Dan Basse, analyst with AgResource Co.
"There was end-user buying all the way down. It doesn't appear to be export related, but it does appear to be ethanol and feed related," he said.
Corn was also supported by spreading, with traders buying corn and selling soybeans or wheat.
December corn futures on the Chicago Board of Trade rose 9 cents, or 1.2 percent, to $7.45-1/2 per bushel after earlier hitting a five-week low of $7.26-1/4.
Commodity funds bought a net 9,000 corn contracts on Monday and sold a net 9,000 soybean contracts and a net 2,000 wheat contracts, trade sources estimated.
CORN CROP SHRINKING
USDA on Monday cut corn production to 12.497 billion bushels, still the third-largest crop on record but down 3 percent from its August estimate and below the average analyst estimate for 12.519 billion bushels, as poor weather hurt the crop.
USDA did not reduce its harvested acreage view as many analysts had expected, suggesting further cuts to production.
"It was surprising they didn't lower the harvested corn acreage. Everyone thinks the harvested acreage will have to come down 1 million because of everything that happened over the summer," said Mary Ann Kwiatkowski, analyst for Amber Trading. She was referring to the flooding of corn acreage along the Mississippi and Missouri rivers.
USDA also reduced its demand forecast as historically high prices were projected to slow exports, reduce ethanol production and force livestock producers to limit corn use or seek out alternative feeds.
CBOT November soybeans fell 30-3/4 cents, or 2.2 percent, to $13.96 per bushel in the steepest drop in 2-1/2 months after USDA raised its crop production forecast to 3.085 billion bushels, above trade estimates for 3.032 billion bushels and up from its August estimate of 3.056 billion, due to higher yields.
Soy yields had been expected to drop after dry weather stressed the developing crop across the US Midwest for much of the summer.
CBOT December wheat fell 2-1/2 cents, or 0.3 percent, to $7.27-1/4 a bushel after earlier hitting a one-month low of $7.10-1/4 as USDA raised US and global wheat ending stocks estimates in its monthly report.
Copyright Reuters, 2011