(Reuters) – Chicago soybean futures fell on Friday to pull further away from a record high hit earlier this week as rains improved harvest prospects in parts of the U.S. Midwest that has been scorched by the worst drought in 56 years.
Wheat was little changed after rallying in the previous session on expectations that major producer Russia could soon run short of exportable supply after a drought-hit harvest, prompting importers to turn to a more abundant U.S. wheat crop.
Chicago Board of Trade new-crop November soybeans have given up nearly 1 percent this week, snapping five consecutive weeks of drought-driven gains. December corn has also eased this week, falling for a second straight week.
Soybeans in drought-slammed Indiana, a top grain growing state in the U.S. Midwest, got a welcome boost from late-season August rains, with the heaviest amounts falling last week as the remnants of Hurricane Isaac moved through the region, a top state agronomist said.
The market is expecting the U.S. Department of Agriculture to raise soybean crop estimate in its supply-demand report due on Sept. 12 because of rains in recent weeks across northern and eastern Midwest.
“It will take some steam out of the market if USDA revises soybean yields higher,” said Victor Thianpiriya, agricultural commodity strategist at ANZ in Singapore. “Forecasts of a weak El Nino could mean that production of palm oil out of Southeast Asia will be relatively good next year.”
The U.S. government forecaster has issued its most definitive report since first raising the El Nino alert three months ago, forecasting a weak phenomenon that will last until the Northern Hemisphere spring.
CBOT November soy fell 0.5 percent to $17.38-1/2 a bushel by 0851 GMT. The spot September contract fell 0.8 percent to $17.31-1/2 to move further away from a high of $17.94-3/4 on Tuesday, which was a record for Chicago futures.
BLACK SEA WHEAT EXPORTS TO DRY UP
The Chicago wheat market took a breather after climbing 2.8 percent on Thursday amid expectations of waning exports from Russia, which may exhaust its limited export surplus within weeks after a flurry of sales.
December wheat inched up 0.1 percent to $8.92-3/4 a bushel in hesitant trade. In Europe, November milling wheat in Paris added 1.1 percent to 264.25 euros a tonne in opening trade as the market factored in the strong close in Chicago on Wednesday.
The purchase of 475,000 tonnes of wheat from Russia, Romania and Ukraine by Egypt’s General Authority for Supply Commodities (GASC) in a tender on Thursday highlighted how high prices had made U.S. and European Union supplies uncompetitive. However, it also raised the question of whether Egypt, the world’s top importer, was trying to grab as much Russian wheat as possible before supplies run low.
“This tender showed that Russian prices are much less aggressive for
further-away deliveries from November,” French consultancy Agritel said in a note. “Thus, the country’s export activity should soon slow down regarding the very low wheat harvest.”
GASC’s vice chairman Nomani Nomani confirmed the prospect Egypt would turn more towards non-Black Sea origins.
“We can see that the Russian bids were much less for November shipment…
That means that more purchases from France during that period will be very probable,” he added.
Russia has repeatedly denied that it would ban exports due to a poor crop this year. It had curbed shipments in 2010 after a historic drought, sparking a major rally in prices.
But operators say that Russia could run out of supplies for the export market if it maintains its current pace of sales — it has sold to Egypt’s GASC 840,000 tonnes of wheat in the agency’s five back-to-back tenders that began Aug. 10.
In what will be another test of export competition in wheat, Iraq has issued a tender to by at least 50,000 tonnes of wheat, with a closing date of Sept. 16 for bids, a trade ministry source said.
The corn market was curbed by expectations farmers in Argentina, the world’s second-largest exporter, will react to record international prices this year fuelled by the U.S. drought to plant a large crop.
High global prices and recent rains are spurring farmers to plant corn in Argentina this season, a leading grains exchange said on Thursday as it raised its plantings forecast.
Argentina is set to produce a record corn harvest of 24.5 million tonnes during the 2012/13 season, President Cristina Fernandez said.
But the corn market remains firmly underpinned by the drought-ravaged U.S. corn crop and many operators expect the USDA to cut its U.S. yield forecast again in its report next week.
While awaiting for the Sept. 12 report, operators will be watching for more updates from private forecasters, and weekly U.S. export data later on Friday for signs of any demand rationing.
