Grain futures retreated Thursday as traders unwound bets that bad weather would affect this year's crops.
Corn and wheat futures rose earlier in the week after a bout of heavy snow and rain froze, soaked or crushed crops in parts of the Midwest and Plains. But inconclusive evidence of damage, combined with large stocks that limited any potential upside, prompted a selloff.
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"We're probably stuck in this range. We had a weather scare and the market reacted earlier in the week," said Doug Bergman, director of the agricultural trading desk at RCM Alternatives. Traders "decided that that rally was not warranted."
Wheat futures for July delivery tanked 3.6% at the Chicago Board of Trade, closing at $4.37 3/4 a bushel. CBOT July corn futures fell 2.2% to $3.66 1/2 a bushel.
Traders weren't encouraged by the final reports from the Wheat Quality Council tour in Kansas, which finished Thursday. Yield estimates by crop scouts, who spent three days traversing wheat fields across the state, averaged 46 bushels an acre at the end of the tour. That was down from last year's estimate of 48 bushels an acre, a smaller decline than many analysts had anticipated. Actual production last year ended up at 58 bushels an acre.
But tour organizers said recent estimates didn't reflect the full extent of the weather damage. Many of the worst fields were simply inaccessible, with the crop buried under snow. Instead, participants estimated total production for this year's Kansas wheat crop at 282 million bushels, down from actual production of 467 million bushels last year.
"That's a big drop," said Dave Green, vice president of the Wheat Quality Council.
External pressure also increased the heat on grain prices Thursday. Crude-oil futures crashed over 5% on Thursday to multimonth lows.
"The grain sector simply does not have a strong enough story to sustain a rally in the face of this widespread selling of the commodity sector," said Arlan Suderman, chief commodities economist at INTL FCStone.
Soybean prices were largely steady, with CBOT July futures falling 0.1% to $9.74 1/4 a bushel. But the oilseed could have a tougher time ahead as improving weather allows for efficient planting of the new crop, said Richard Feltes, vice president of research at brokerage R.J. O'Brien.
"In the long run," he said in a note to clients, "soybeans have the greatest downside."
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(END) Dow Jones Newswires
May 04, 2017 15:53 ET (19:53 GMT)