U.S. grains fell on Wednesday as investors cashed in profits after a blistering rally, but losses narrowed at the close by more than half as end users purchased grain and as updated weather outlooks scaled back rain forecasts for the Midwest.
Analysts said "buying on the breaks" signalled that rallies in corn and soybeans still have legs. Corn is up about 50 per cent since mid-June with soy up 20 per cent because of severe drought damage to developing crops.
"The rains are too little too late. Will they be helpful, yes. But they will not help much in increasing yield," said Mark Kinoff, president of Ceres Hedge in Chicago.
"For a lot of people who had not bought what they should have bought, it was a gift for them today," he said of the early sharp declines in corn and soybean futures.
After the market closed, brokerage INTL FC Stone issued its estimate of the U.S. corn yield of 124.3 bushels per acre and production at 11.043 billion bushels. It pegged the soybean yield at 36.2 bushels per acre, and the crop at 2.730 billion.
The forecasts were much smaller than the U.S. Department of Agriculture's corn yield estimate of 146 bushels per acre and production at 12.97 billion. Its soybean yield was an estimated 40.5 bushels per acre, and output of 3.050 billion bushels.
A weekly Reuters poll of analysts on Tuesday showed a further decline in yields and production.
Spot August soybeans tumbled as much as 4 per cent before closing 2 per cent lower at $16.82-1/4 per bushel as trader exited long positions before the contract's expiry on Aug 14, but traded volume was relatively light.
Benchmark November soybeans fell as much as 2.6 per cent before ending 0.7 per cent lower at $16.29 a bushel.
"There's profit taking," said grains analyst Charlie Sernatinger of ABN AMRO in Chicago, adding that there was also some chart-based technical selling earlier in the session.
He also said there were anecdotal accounts of high corn yields in the South as the harvest got rolling, but farmers were still weeks away from combining in the Midwest, which accounts for 75 per cent of the country's corn and soy production.
Much of the corn harvested in the southern states is typically channelled to export terminals at the U.S. Gulf, but the surge in prices this year has dented foreign interest, causing supplies to build up in the domestic pipeline.
CBOT new-crop December corn ended 0.6 per cent lower at $8.00-1/2 a bushel, rebounding from a session low $7.82.
Wheat futures fell sharply for a second straight session after leading exporter Russia quashed market speculation that the country would curb exports due to a poor harvest this year, and France raised its wheat crop estimate.
In the midday update of the weather, meteorologists reduced the amounts of rain forecast for the Midwest next week.
"The biggest change is less rain in Iowa, northern Missouri, western Illinois, Minnesota and Wisconsin than earlier runs showed," said Drew Lerner, meteorologist for World Weather Inc.
The markets fell hard earlier in the session on forecasts for improved chances for rain through the weekend. Agronomists had said the hardy soybean crop needs just a fifth of the rain corn needs due to its much smaller biomass and that timely rains could help soybeans flourish.
September wheat fell 2.4 per cent to $8.67-1/4 a bushel, adding to its Tuesday's decline of 2.9 per cent.
Russia factor in wheat
Traders said wheat was pressured by Russia saying it would not curb exports, the winter wheat harvest coming to a close in the United States and a surprise improvement in condition ratings of the U.S. spring wheat crop being harvested now. Russia will have an exportable surplus of wheat in the range of 11 million to 15 million tonnes in 2012/13 depending on the final 2012 crop which was damaged by drought, a government source told Reuters on Wednesday.
Traders were cautious, saying there was still a lot of uncertainty given that weather was dimming harvest prospects in Russia.
"You have to wonder if it's a political statement. This does not reflect the reality of the crop," a European trader said after the government source said the wheat crop could be up to 50 million tonnes, against a 46-49 million range given previously.
In Europe, benchmark November milling wheat futures ended 1.8 per cent lower at 255.75 euros.
Reporting by Naveen Thukral in Singapore, Svetlana Kovalyova in Milan, Valerie Parent in Paris and Sam Nelson in Chicago,