U.S. corn slid more than 1 per cent from record highs on Monday and soy tumbled more than 3 per cent from its peaks, due to forecasts for rain in drought-plagued U.S. crop regions, tumbling equities and a stronger dollar.
"Forecasts are a little wetter than they were last week, the rains will help some of the later crops and the EU debt crisis is hitting a broad spectrum of commodities," said Shawn McCambridge, an analyst for Jefferies Bache. After the markets closed, a U.S. government report showed that the condition of the U.S. corn and soybeans crops continued to deteriorate but at a slower pace following scattered rains in the eastern part of the Midwest grain belt.
The U.S. Department of Agriculture's weekly crop progress report showed that the corn crop in good-to-excellent condition fell 5 per centage points to 26 per cent, more than 4 per centage points expected by traders in a Reuters poll but less than the 8 per centage point drop the previous week.
The soybean crop was 31 per cent in good-to-excellent shape, down 3 per centage points and within trade expectations. Wheat futures fell more than 3 per cent, following corn and soy in the volatile weather market and as global equities tumbled on renewed worries about the euro zone debt crisis and slower-than-expected economic growth in China.
"The soybean complex is lower across the board as macro pressures are weighing on commodities. Weather forecasts, while hardly constructive, are at least a little less foreboding, and this is adding to the pressure," said Sterling Smith, analyst for Citigroup.
Corn has staged a vigorous rally in July, soaring to a record on Friday as the most expansive U.S. drought in over a half century spread, slashing crop prospects and fueling worries about food inflation.
New-crop December had soared 25 per cent so far in July, putting that futures contract on course for a record one-month rally.
Spot corn had hit a record peak of $8.28-3/4 and new-crop December touched $8 per bushel for the first time in Sunday Globex trading as the drought cut crop prospects.
TOUR REVEALS DROUGHT IMPACT Several corn fields inspected in central Ohio on Monday showed yields at 19 per cent below year-ago levels despite beneficial recent rains.
The MDA EarthSat Crop Tour began on Monday and initial samplings in Ohio showed corn yields of 129.4 bushels per acre, down from last year's average in the same area of 159.8 bushels as reported by the U.S. Department of Agriculture.
The statewide corn yield in Ohio last year was 158 bushels per acre.
"Heat and dryness aborted kernels and the population was really thin," said Kyle Tapley, senior agriculture meteorologist at MDA EarthSat.
The five-day crop tour ends on Friday in Omaha, Nebraska.
SOY, WHEAT REVERSE GAINS
Soybeans fell for the first time in four trading sessions, losing 2 per cent from the record $17.77-3/4 notched on Friday and posting the biggest one-day drop in nearly two months.
Despite Monday's fall, soybeans remained 13 per cent higher for July, which would be the biggest one-month advance in four years.
Wheat dropped for the first time in eight days, falling 2 per cent from a near four-year high notched late last week, and posted the biggest one-day decline this month.
Tumbling corn and soybeans led the way down as renewed fears over Europe's debt crisis hit markets running the gamut from equities to bonds to commodities.
Chicago Board of Trade September corn was down 10-1/2 cents per bushel at $8.14, August soybeans were down 59 at $16.98-1/2 and September wheat lost 30-1/2 cents at $9.12-3/4.
A Reuters poll of nine analysts released on Monday indicated the high-flying U.S. grains prices could sink as much as 19 per cent by year-end from their drought-fueled peaks, which should temper inflation for a variety of foods ranging from meats to cereals to cooking oil.
Goldman Sachs on Monday cut its corn and soybean yield estimates and raised its three-month projection for corn prices to a record $9 per bushel and soy to a record $20 per bushel.
Sam Nelson is a Reuters reporter in Chicago.