GRAINS-Soy posts biggest drop in a year as yields surprise

Tue Sep 18, 2012 2:47am IST

* Soybeans fall by daily trading limit
    * Wheat tumbles 5 pct
    * Corn, soybeans lower on U.S. harvest pressure
    * Yields reported better than expected

 (Updates with U.S. weekly crop report)
    By Rod Nickel and K.T. Arasu
    WINNIPEG, Manitoba, Sept 17 (Reuters) - U.S. soybean futures
tumbled the daily trading limit on Monday, posting their biggest
percentage drop in nearly a year on selling sparked by anecdotal
accounts of better-than-expected harvest yields in the Midwest
farm belt.
    Corn at the Chicago Board of Trade tumbled to a more than
two-month low while wheat sank 5 percent under the weight of the
soybean market, which was considered to be the strongest
fundamentally of the three. Soy's stocks-to-use ratio, a measure
of demand, was the lowest in nearly five decades.
    CBOT November soybeans fell 70 cents per bushel - the
most a soy contract can move either way on a trading day under
exchange rules - on farmers' accounts of better-than-expected
yields in harvesting over the weekend.
    Some of the better yields were coming from the western
Midwest, an area that had remained dry as the worst drought in
half a century devastated crops. The northern and eastern parts
of the Midwest got beneficial rains in August.
    Prices for soybeans in the cash markets in Iowa, the top
corn and soybean state, fell sharply about two weeks ago,
perhaps an early signal that yields would exceed expectations.
    Traders also attributed the selloff to rains in Brazil, the
world's second-largest exporter of soybeans after the United
States, as its farmers gear up to plant their crop.
    CBOT November soy slid 4 percent to $16.69 a bushel
and registered the lowest front-month price since Aug. 20.
    CBOT new-crop December corn sank 4.4 percent, or 34
cents, to $7.48 a bushel and touched the lowest price for a
nearby contract since early July. 
    After U.S. trading hours, the U.S. Department of
Agriculture's weekly crop progress report showed 10 percent of
the soybean crop was harvested as of Sunday, up from 4 percent a
week ago and just ahead of the average trade expectation of 9
percent complete.
    Twenty-six percent of U.S. corn was harvested versus 15
percent a week earlier and slightly better than the expected 24
percent.  [ID: 
     December wheat fell 5 percent, or 46-1/4 cents, to
$8.78 per bushel.
    The severe U.S. drought in the Midwest drove nearby corn
prices to a record high in early August and pushed soybeans to
an all-time top in early September, leading to thoughts that
buyers would ration demand in the face of high prices.
    The U.S. corn crop looks to be the smallest in six years,
and the soybean crop the smallest in nine years, the U.S.
Department of Agriculture said last Wednesday. 
    But with the harvest advancing, a dismal situation might be 
improving slightly.
    
    YIELDS SURPRISE
    "There have been reports of yields being better than
expected during the harvest over the weekend, and farmers were
also selling more corn than expected because they don't want to
store grain that is affected by diseases," said Charlie
Sernatinger, vice president of sales at ABN AMRO.
    Trace amounts of aflatoxin, a naturally occurring toxin,
have shown up in some of the corn harvested in the United
States. Any major outbreak has the potential to snarl the
grain-handling system. 
    Jeff Hainline, president of Advance Trading, said he was
getting anecdotal accounts of better-than-expected yields from
grain elevators and farmers in the Midwest.
    "It's nothing scientific, but these are people we trust," he
said, adding that there were accounts of soybean yields being
better than expected in the western Corn Belt.
    The fields harvested so far show a big variance in corn
yields. Analysts said yields averaged from just 5 to 10 bushels
per acre in some fields to 160 to 175 bushels in others.
    Wheat was pulled down by corn, long liquidation and
favorable rains in parched areas of Australia.
    The grain markets got a boost last week from the Federal
Reserve's latest economic stimulus plan, but that euphoria has
passed and outside markets did not offer the same bullish lift,
said Shawn McCambridge, grains analyst with Jefferies Bache in
Chicago. 
    Speculators, who cut their net long positions in Chicago
grains according to the most recent regulatory data, are
responsible for some of the selloff. 
    "From a fund perspective, the upside potential is very
limited," McCambridge said.
    
 Prices at 2:13 p.m. CDT (1913 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  748.00   -34.00  -4.4%   15.7%
 CBOT soy                  1669.00   -70.00  -4.0%   39.3%
 CBOT meal                  503.50   -20.00  -3.8%   62.7%
 CBOT soyoil                 54.98    -1.99  -3.5%    5.5%
 CBOT wheat                 878.00   -46.25  -5.0%   34.5%
 CBOT rice                 1529.00     1.50   0.1%    4.7%
 EU wheat                   260.00    -6.50  -2.4%   28.4%
 
 US crude                    96.29    -2.72  -2.7%   -2.6%
 Dow Jones                  13,542      -51  -0.4%   10.8%
 Gold                      1760.24    -9.22  -0.5%   12.6%
 Euro/dollar                1.3100  -0.0027  -0.2%    1.2%
 Dollar Index              79.0150   0.1680   0.2%   -1.5%
 Baltic Freight                663        1   0.2%  -61.9%
    

 (Additional reporting by Sam Nelson and Julie Ingwersen in
Chicago, Editing by Bob Burgdorfer and John Wallace and Carol
Bishopric)
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