US corn futures fell 2.4 percent on Tuesday while soyabeans and wheat also slid as funds liquidated long positions amid bearish chart signals and favourable US crop weather. Both corn and soyabeans posted their biggest daily declines since January.
"Today is a corrective trade," said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago. "You have a market that was overbought going into yesterday's session. The market has little (supportive) fundamental information coming in," McCambridge said. Traders estimated that commodity funds had sold some 18,000 Chicago Board of Trade corn contracts, along with 7,000 soyabean contracts and 2,000 wheat.
On Monday, all three markets posted downside reversals, with the front contracts closing lower after setting higher highs and lower lows than the previous session. Soyabeans were retreating after hitting a six-month high on Monday. Some interpreted the reversals as bearish signals that the markets had peaked, at least for the time being. "Given the 'reversal' in the grains yesterday, we are going to exit the entire position this morning," commodities investor Dennis Gartman wrote in his daily newsletter to clients.
Gartman told Reuters in a telephone interview that he sold a "very large" position in corn and sold a small number of positions in soyabeans. He said he did not have positions in wheat. CBOT corn for May delivery settled 16 cents lower at $6.47-1/2 a bushel while May soyabeans ended down 21-1/2 cents at $13.45 a bushel. May wheat ended down 9-3/4 cents at $6.42-1/2. Open interest in CBOT soyabeans has risen nearly 40 percent so far in 2012, and weekly CFTC data shows the net long position held by commodity funds at a 13-month high, leaving the market ripe for a bout of long liquidation.
"The biggest issue that worries me in beans is the size of the long fund position," said Dale Durchholz with Agrivisor in Bloomington, Illinois. Traders noted unusually mild weather in the US Midwest this week that should favour early planting of corn and soyabean crops. Rain showers expected across parts of the US Plains and Midwest should benefit the developing winter wheat crop.