Forexpros – U.S. grain futures were lower during European morning hours on Wednesday, as an impressive rally to multi-year highs in corn, wheat and soy prices prompted investors to cash out of the market and lock in gains.
Grain traders continued to monitor drought-like weather conditions in the U.S. Midwest and Great-Plains region.
Escalating concerns over scorching heat and dry weather conditions in key grain-growing regions in the U.S. have been fuelling a furious rally in grain prices in recent weeks.
Corn has gained nearly 35% since June 1, wheat prices surged approximately 33%, while soy rose 25% in the period.
The National Weather Service issued heat advisories across the northern Plains and Upper Midwest as forecasts are calling for temperatures as much as 20 degrees above normal.
The National Oceanic and Atmospheric Administration deemed the drought as the worst since 1956.
However, investors cashed out of the market amid concerns high prices may be hurting global demand for U.S. grains.
On the Chicago Mercantile Exchange, corn futures for September delivery traded at USD7.6938 a bushel, dropping 1.3%.
Prices touched USD7.9662 a bushel on Tuesday, the highest for the September contract since June 10, 2011, when prices rose to a record high of USD7.9900 a bushel.
Weekly crop progress report from the U.S. Department of Agriculture showed that the dry weather conditions across the U.S. Midwest and Great Plains-region caused significant damage to crops.
U.S. corn crop ratings declined to the lowest levels for this time of year since 1988 last week.
The USDA said that 31% of the U.S. corn crop was rated in ‘good’ to excellent’ condition as of July 15, down sharply from 40% the previous week and below the 66% recorded in the same week a year earlier.
Last week, the U.S. Department of Agriculture slashed its forecast for this year’s corn yield by 12% to 146 bushels an acre from a previous estimate of 166 bushels.
The next few weeks will be important for the grain, as the crop could face bigger losses if more rain doesn’t come during its pollination phase.
Corn prices have surged over the past four weeks amid concerns dry soil in the U.S. corn-belt could strain the development of crops in the region, just as it enters its key pollination phase in the next few weeks.
The U.S. produced 38% of the world’s corn last year, making it the both world’s largest corn producing nation and the largest exporter of the grain.
Elsewhere, soybeans futures for August delivery traded at USD16.3225 a bushel, shedding 0.4%. Prices hit USD16.4725 a bushel on Tuesday, a fresh contract high.
Soy futures have gained sharply in recent weeks, as the same hot, dry weather that boosted corn was seen benefitting soy futures as well. Soybeans are grown in many of the same regions across the U.S. as corn.
Only 34% of the U.S. soybean crop was rated ‘good’ to ‘excellent’ last week, down from 40% the previous week. Nearly 64% of the crop was ‘good’ to ‘excellent’ in the same week a year earlier.
Last week, the USDA cut its yield forecast for the soybean crop to 40.5 bushels per acre from 43.9 bushels per acre.
U.S. soybean production was now expected to total 3.05 billion bushels in the current marketing year, nearly 5% lower than the 3.205 billion bushels the USDA predicted in June.
The oilseed will begin flowering in late July to early August, a crucial development stage when stressful weather can severely damage yields.
Global soybean supplies are already on the decline, as severe drought conditions earlier in the year in major South American growers Brazil and Argentina damaged crops in the region.
Meanwhile, wheat for September delivery traded at USD8.7050 a bushel, tumbling 1.6%. Prices touched USD8.9775 a bushel on Tuesday, the highest since August 21, 2008.
Wheat futures have rallied sharply in recent weeks, tracking strong gains in corn and amid concerns over a disruption to supplies from the Black-Sea region.
Last week, the USDA reduced its projection of the wheat crop in Russia by 4 million tons due to poor yields.
Russia is a major wheat exporter and competes with the U.S. for business on the global market. A downbeat Russian crop outlook could boost demand for U.S. supplies, which is the world’s third largest wheat producer and biggest exporter.
The agency also cut its forecast for U.S. wheat inventories at the end of the 2012-13 marketing year to 664 million bushels, below expectation of 725 million.
The USDA estimated total U.S. wheat production this year at 2.22 billion bushels, slightly below expectations for 2.25 billion.
Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.
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