Wheat futures fell sharply Thursday, halting a recent rally even as the U.S. crop remains under threat.
Spring wheat futures gained around 40% in a month as drought conditions stressed the crop in states like the Dakotas, also helping pull other winter-wheat varieties higher.
Traders reversed course on Thursday, however, selling contracts to lock in gains. Most actively traded spring wheat futures for September delivery fell 6.2% to $7.69 a bushel at the Minneapolis Grain Exchange, while September winter wheat at the Chicago Board of Trade fell 3.8% to $5.39 a bushel.
"We went too far, too fast," said Brian Grossman, a market strategist at Zaner Group in Chicago. "A pullback like this is a healthy sign of a market. It's an indicator that we're getting near to the end."
The selling came despite a continued decline in crop conditions, reported by the U.S. Department of Agriculture on Wednesday afternoon. The proportion of spring wheat rated good or excellent fell to 37% from 40% last week, while winter wheat dropped to 48% good-or-excellent from 49% a week earlier.
The selling also weighed on corn and soybean futures, which recently started to rally alongside wheat. Uncertainty over whether the difficult conditions that have plagued the northern Plains could drift eastward toward the Corn Belt have prompted buying, especially with the corn crop entering into its key yield-forming phase.
Weather forecasts showing a smattering of extra rain in parts of the Midwest eased some of those concerns, however. The Commodity Weather Group said the extra rain was "critical" for the corn crop in places like central Illinois.
"The fledgling rally in the corn and bean markets that is barely a week old would appear to be experiencing the first test of confidence," said Dan Hueber, manager of advisory firm the Hueber Report.
CBOT July corn futures fell 0.4% to $3.80 1/4 a bushel. July soybeans recovered from losses to close 0.5% higher at $9.80 3/4 a bushel.
Private forecaster Informa Economics estimated this year's corn yield at 169.7 bushels per acre, analysts said, above some expectations. The USDA showed corn condition improving in its progress report.
Analysts also said Informa put spring wheat production at 434 million bushels, down from its previous estimate.
Write to Benjamin Parkin at firstname.lastname@example.org
(END) Dow Jones Newswires
July 06, 2017 16:06 ET (20:06 GMT)