CHICAGO (Reuters) - Corn futures fell 2.4 percent on Tuesday while soybeans and wheat also slid as funds liquidated long positions amid bearish chart signals and favorable crop weather.
Both corn and soybeans posted their biggest daily declines since January.
"Today is a corrective trade," said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago. "You have a market that was overbought going into yesterday's session. The market has little (supportive) fundamental information coming in," McCambridge said.
Traders estimated that commodity funds had sold some 18,000 Chicago Board of Trade corn contracts, along with 7,000 soybean contracts and 2,000 wheat.
On Monday, all three markets posted downside reversals, with the front contracts closing lower after setting higher highs and lower lows than the previous session. Soybeans were retreating after hitting a six-month high on Monday.
Some interpreted the reversals as bearish signals that the markets had peaked, at least for the time being.
"Given the 'reversal' in the grains yesterday, we are going to exit the entire position this morning," commodities investor Dennis Gartman wrote in his daily newsletter to clients.
Gartman told Reuters in a telephone interview that he sold a "very large" position in corn and sold a small number of positions in soybeans. He said he did not have positions in wheat.
CBOT corn for May delivery settled 16 cents lower at $6.47-1/2 a bushel while May soybeans ended down 21-1/2 cents at $13.45 a bushel. May wheat ended down 9-3/4 cents at $6.42-1/2.
Open interest in CBOT soybeans has risen nearly 40 percent so far in 2012, and weekly CFTC data shows the net long position held by commodity funds at a 13-month high, leaving the market ripe for a bout of long liquidation.
"The biggest issue that worries me in beans is the size of the long fund position," said Dale Durchholz with Agrivisor in Bloomington, Illinois. "If the bean market falters, the thing you really need to worry about is (whether) could we end up putting the bean market into a liquidation break," Durchholz said.
Traders noted unusually mild weather in the U.S. Midwest this week that should favor early planting of corn and soybean crops. Rain showers expected across parts of the U.S. Plains and Midwest should benefit the developing winter wheat crop.
"I don't see anything fundamentally, other than favorable Northern Hemisphere weather," Dan Basse, president of AgResource Co in Chicago, said of the weak tone in the grain markets.
He said traders were adjusting positions ahead of key reports from the U.S. Department of Agriculture next week on U.S. planting intentions and quarterly grain stocks.
"We've got (USDA) reports next week, and the weather is favorable. Maybe we have digested much of the South American crop losses, and we're focused more on Northern Hemisphere weather," Basse said.
The market was anticipating an increase in U.S. corn plantings from last year and little change in U.S. soybean acreage.
Worries about a slowing pace of economic growth in China, the world's biggest soy importer, added pressure. BHP Billiton (BHP.AX), the world's biggest miner, said on Tuesday it was seeing signs of "flattening" iron ore demand from China.
Investors were watching a strike by Argentina's truckers, who are seeking higher pay, that disrupted the flow of corn and soybeans to the country's main ports for a second day on Tuesday.
Prices at 2:48 p.m. CDT (1948 GMT)
CHG CHG CHG CBOT corn 647.50 -16.00 -2.4% 0.2% CBOT soy 1345.00 -21.50 -1.6% 12.2% CBOT meal 365.60 -5.30 -1.4% 18.2% CBOT soyoil 54.33 -1.07 -1.9% 4.3% CBOT wheat 642.50 -9.75 -1.5% -1.6% CBOT rice 1436.50 -24.00 -1.6% -1.6% EU wheat 208.50 -2.00 -1.0% 3.0%
US crude 105.68 -2.48 -2.3% 6.9% Dow Jones .DJI 13,165 -74 -0.6% 7.8% Gold 1647.51 -12.89 -0.8% 5.4% Euro/dollar 1.3216 -0.0021 -0.2% 2.1% Dollar Index .DXY 79.6550 0.2030 0.3% -0.7% Baltic Freight .BADI 884 5 0.6% -49.1%
Additional reporting by Naveen Thukral in Singapore and Svetlana Kovalyova in Milan; Editing by Bob Burgdorfer, Marguerita Choy and David Gregorio