Monday, 23 July 2012

GRAINS-Corn, soy ease from record highs; U.S. crops face more heat

Mon Jul 23, 2012
* Corn, soy down from record highs on weak global markets

* Wheat drops 2.2 pct after climbing to four-year top

* Shares, euro pressured as Spain stokes bailout fears

* Forecasts point to more heat in U.S. Midwest this week

By Naveen Thukral
SINGAPORE, July 23 (Reuters)
- Chicago corn and soy slid on Monday after marking record highs last week, tracking declines in broader markets as worries on Europe's debt woes festered, though relentless heat in the U.S. grain belt continued to destroy crops.

Wheat eased after rising to its highest in more than four years as pressure from weakness in global financial markets weighed on agricultural futures.

New-crop corn, which has surged 57 percent in the last five weeks, and soybeans, up 28 percent during the period, are poised for further gains this week on forecasts of more heat in the coming days.

"We don't think the rally is over year yet, especially for corn as demand rationing, which the market has to do, is something it has never done before in terms of the scale," said Victor Thianpiriya, an agricultural commodity strategist at ANZ.

"The supply situation for corn and soybeans is extremely tight."

Chicago Board of Trade new-crop December corn fell 1.2 percent to $7.86 a bushel, while the front-month contract slid 1.8 percent, after climbing to a record high of $8.28-3/4 a bushel on Friday.

Spot-month soy gave up 1.5 percent to $17.32 a bushel, down from Friday's all-time high of $17.77-3/4. September wheat lost 2.2 percent to $9.23 a bushel after climbing to $9.47-1/4, its highest since June 2008.

"We are seeing risk aversion throughout the financial markets," said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia. "Crude oil is trading in negative territory, the U.S. dollar index has opened higher, and the Aussie dollar has lost more ground this morning."

Shares fell and the euro stayed vulnerable after hitting fresh lows early on Monday, as concerns grew about Spain's ability to stave off a sovereign bailout.

Fundamentally, corn and soybeans will receive more support with forecasts saying the U.S. Midwest's worst drought in 56 year shows no sign of abating.

Investors will also get price direction from Monday's crop progress report from the U.S. government that is expected to show another decline in the condition of corn and soybeans crops in the world's largest exporter of grains.

Traders are expecting a 3 to 5 percentage point drop in the condition-ratings for both corn and soybeans.

Hotter-than-normal temperatures were expected through October in most of the contiguous 48 states, the National Oceanic and Atmospheric Administration said, and did not rule out drought continuing past October.

It said there was a chance of the El Nino weather anomaly which could mean more excessive heat and dryness by the end of 2012. El Nino is characterized by unusually warm ocean temperatures in the equatorial Pacific.

Large speculators raised their net long stake in corn to the biggest in more than three months as the U.S. drought triggered a sharp rise in corn prices, regulatory data released on Friday showed.

The Commodity Futures Trading Commission's weekly commitments of traders report also showed that non-commercial traders, a category that includes hedge funds, boosted their net long stake in soybeans to the most since early May in the five trading days ended July 17.

  Prices at  0242 GMT
  Contract        Last    Change  Pct chg  Two-day chg MA 30   RSI
  CBOT wheat     923.00   -20.25  -2.15%    -2.15%     801.87   78
  CBOT corn      786.00    -9.75  -1.23%    -1.23%     681.99   70
  CBOT soy      1660.00   -26.25  -1.56%    -1.56%    1498.61   74
  CBOT rice      $15.53   -$0.01  -0.06%    -0.06%     $15.03   68
  WTI crude      $90.60   -$1.23  -1.34%    -2.22%     $84.64   63
  Currencies                                               
  Euro/dlr       $1.211  -$0.001  -0.10%    -0.36%
  USD/AUD         1.031   -0.005  -0.52%    -0.64%
  Most active contracts
  Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
  RSI 14, exponential

(Reporting by Naveen Thukral; Additional reporting by Colin Packham in Sydney; Editing by Joseph Radford)

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