GRAINS-Corn slips for 2nd day, takes breather from drought rally

Mon Aug 13, 2012 10:31am IST

* Corn dips after hitting record top on Friday
    * Market eyes demand rationing, prices to remain high
    * USDA slashes corn crop estimate, cuts soy crop

 (Adds details, quotes)
    By Naveen Thukral
    SINGAPORE, Aug 13 (Reuters) - Chicago corn edged lower on
Monday, giving up more ground as the market took a breather from
a drought-driven rally that lifted prices to an all-time high in
the last session and raised fears of a food supply crisis.
    Soybeans slid around half a percent after rising on Friday,
while wheat extended losses to nearly 4 percent over two
sessions on smaller-than-expected cuts in global wheat
production.
    Even as corn eased, analysts said prices were expected to
remain high amid tight supplies of new-crop corn, which has
gained 60 percent since mid-June.
    On Friday, the U.S. Department of Agriculture, in its first
survey-based report detailing damage from the drought, cut corn
production in the United States by 17 percent, intensifying
fears the world is headed for a repeat of the 2008 food supply
crisis.
    "It is a little bit of profit-taking today and we are seeing
a bit of buy the rumour and sell the fact scenario," said Luke
Mathews, a commodities strategist at the Commonwealth Bank of
Australia. "The fundamental picture is very bullish as the U.S.
and global corn supplies are critically tight."
    Chicago Board of Trade new-crop December corn fell 0.5
percent to $8.05 a bushel by 0407 GMT and November soy 
also lost half a percent to $16.34-1/2 a bushel. September wheat
 lost 1 percent to $8.76 a bushel.
    The front-month corn hit a record high of $8.43-3/4 a
bushel on Friday.
    The USDA pegged the U.S. corn yield at 123.4 bushels per
acre, below the average trade estimate of 127.3 bushels and down
from its July estimate of 146 bushels. The department has now
slashed the corn yield by a total 42.6 bushels in two months.
 
    The aggressive stance reflected the severity of the damage
from the drought that is centered in the U.S. Midwest farm belt,
which grows 75 percent of the country's corn and soy crops that
are used for food, feed and biofuels.
    The rally is grain prices has renewed the food-versus-fuel
debate centered on the U.S. ethanol mandate as 40 percent of the
corn crop will be made into fuel for cars and trucks.
    The Group of 20 countries are planning a meeting to
coordinate a response to surging food prices, the Financial
Times reported on Monday, as the worst U.S. drought in more than
half a century devastates crops. 
    G20 officials plan to hold a conference call in the week of
Aug. 27 to discuss a meeting, which could be held in late
September or early October, the paper said, quoting four unnamed
officials familiar with the conversations.
    Still, the  wheat market has come under pressure as the USDA
raised its estimates for U.S. production and ending stocks while
keeping exports unchanged. 
    Wheat prices have dropped for the last three weeks but
are up more than 40 percent since mid-June.
    The market was also pressured by smaller-than-expected cuts
in global wheat production, especially in Russia, despite
inclement weather dimming eastern Europe crop prospects.
    USDA cut wheat production in the former Soviet Union states
by 5.6 million tonnes to 82.96 million, and dropped Russian
output by 6 million tonnes to 43 million. 
    There have been persistent rumours that Russia could curb
exports to preserve supplies, as it did in 2010 when its crops
were devastated by a drought. But over the weekend, Egypt, the
world's biggest wheat importer, bought 120,000 tonnes of Russian
wheat. 
    The USDA U.S. corn production this year was cut to 10.779
billion bushels, below trade estimates for 11.026 billion. The
soy crop was pegged at 2.692 billion bushels, below estimates
for 2.817 billion. The department pegged the soybean yield at
36.1 bushels per acre, below expectations for 37.8 bushels.

  Prices at 0407 GMT
  Contract        Last    Change  Pct chg  Two-day chg MA 30   RSI 
  CBOT wheat     876.00    -9.25  -1.04%    -4.05%     873.61   47
  CBOT corn      805.00    -4.25  -0.53%    -2.28%     768.74   49
  CBOT soy      1634.50    -9.25  -0.56%    +0.20%    1585.03   62
  CBOT rice      $15.84   -$0.11  -0.66%    -0.50%     $15.50   56
  WTI crude      $93.50    $0.63  +0.68%    +0.15%     $89.10   66
  Currencies                                                
  Euro/dlr       $1.229   $0.000  -0.01%    +0.01%
  USD/AUD         1.056    0.000  +0.05%    -0.12%
  Most active contracts
  Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
  RSI 14, exponential
 
 (Editing by Himani Sarkar)
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