U.S. soybean futures fell 2.2 percent on Monday, their biggest daily slide in almost a month, due to crop-friendly weather forecasts for top producer Brazil and concerns about Hurricane Sandy's impact on the U.S. financial sector.
The sell-off in soybeans pulled down wheat and corn, although both grains were underpinned by problematic weather for wheat in the southern U.S. Plains, Australia and elsewhere.
Soybeans led declines at the Chicago Board of Trade, falling for a third straight session as forecasts called for improved soybean planting weather in Brazil. The global grain trade is counting on Brazil and Argentina to produce a bumper soy crop in early 2013 after drought clipped the 2012 U.S. harvest as well as the previous South American crop.
The Brazilian government has forecast that the country will produce 80 million to 82.8 million tonnes of soybeans for the 2012/13 season, surpassing U.S. production of 77.8 million. The U.S. Department of Agriculture has projected Brazil's crop at 81 million tonnes.
If crop forecasts are verified, Brazil and Argentina should combine for slightly more than half of global soybean output for 2012/13, a factor that is magnifying the market impact of any shifts in weather as farmers continue planting.
Local analyst Safras e Mercado said Brazil's soybean crop was 28 percent seeded, down from 41 percent at this time a year ago but above the average of 24 percent.
After soaking Brazil's southern soy states of Rio Grande do Sul and Parana, storms are expected to move northward in early November into the country's main center-west soy belt and northeast regions, which need moisture.
"Northern Brazil is too dry but there are rains expected by he end of the week into early next week, so there's a pretty decent scenario in South America," said John Dee, meteorologist for Global Weather Monitoring.
At the CBOT, most-active January soybeans settled down 34 cents, or 2.2 percent, at $15.27-1/4 per bushel. December wheat ended down 5-3/4 cents, or 0.7 percent, at $8.58 a bushel, and December corn fell 3/4 cent, or 0.1 percent, at $7.37 a bushel.
Uncertainty about Hurricane Sandy, which began lashing the U.S. East Coast, also appeared to pressure the markets. The storm, which could become the largest ever to hit the United States, shut trading on Wall Street and closed U.S. government offices.
U.S. stock and bond markets will be closed again on Tuesday, but the two-largest U.S. stock exchange operators, NYSE Euronext NYX.N and Nasdaq OMX Group NDAQ.O, intend to reopen Wednesday, conditions permitting.
"This storm is coming on more aggressively than the trade was prepared for, meaning that the ability of the banks and exchanges to re-open within one to two days is now probably being questioned by a lot of the New York traders," said Mike Zuzolo, president of Global Commodity Analytics in Lafayette, Indiana.
"I am picking up word that maybe the funds in New York are limiting and reducing their risk because of this hurricane, and that was probably the exposure on the long bean side," Zuzolo added.
The weekly U.S. crop progress report, normally released on Monday afternoons, will be delayed as the federal government closes down ahead of Sandy, the U.S. Department of Agriculture said, adding that the rescheduled release time would be announced as soon as offices reopen.
Sandy is unlikely to have a direct impact on U.S. crops although it may disrupt the transport of grain, analysts said.
WORRISOME WHEAT WEATHER
Wheat fell on spillover pressure from soybeans as well as disappointing weekly U.S. export data. The USDA reported export inspections of U.S. wheat in the latest week at 9.7 million bushels, down 40 percent from 16.4 million the previous week.
"Unless we get some supportive export news, the path of least resistance is lower," said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago.
Also bearish, the U.S. dollar index rose to a six-week high on uncertainty over whether Greece can agree to a deal on austerity and with no sign of when Spain might request aid. A firmer dollar makes dollar-denominated commodities, including grains, less competitive on the world market.
But concerns about unfavorable weather in several key wheat-exporting countries, including Australia and the southern U.S. Plains, underpinned values.
Technical buying limited losses in the corn market. CBOT December corn rebounded after holding support at its mid-October low of $7.32-1/2, and the contract settled at $7.37, a tick above its 100-day moving average at $7.36-3/4. December corn has not closed below its 100-day average since mid-June.
In a reminder of weak export demand for U.S. corn, private Egyptian interests have in past days purchased about 180,000 tonnes of corn from South America, European traders said Monday. It was thought largely to have been bought from Argentina, traders said.