U.S. grain futures sank Thursday as improving global weather forecasts raised hopes for larger harvests.
Corn fell by the maximum amount allowed under exchange rules, losing 4%, to $7.29 1/4 a bushel. That was the lowest price for the market since corn futures climbed the daily limit March 31 when the government shocked traders by reporting there was 15% less corn in storage as of March 1 than a year earlier.
Soft red winter wheat sank 4.2%, to a two-week low of $7.77 1/2 a bushel. July is the most actively traded contract month for corn and wheat at the Chicago Board of Trade.
Selling overwhelmed the grains as warmer, drier weather is expected to allow farmers to sow corn in the U.S. Midwest, where planting has been delayed by cool, wet conditions. The market retreated after worries about planting disruptions drove corn prices Tuesday to their highest level since the market reached a record high April 11.
"The worst-case scenarios have been priced in," said Chad Henderson, analyst at Prime Agricultural Consultants, a brokerage in Wisconsin.
Corn traders are following weather forecasts closely because farmers need good weather to grow a large crop to replenish low inventories. Concerns about strong demand draining supplies pushed prices to their record high of $7.80 3/4 a bushel.
Heavy fund selling contributed to the losses in corn, as funds sold an estimated 22,000 contracts, traders said. The daily limit will temporarily expand to 45 cents Friday from 30 cents.
The size of the market's decline was "surprising," given that the U.S. dollar was lower and crude oil was higher, Henderson said. Those factors are normally seen as supportive for grain prices because ethanol is made from corn and a weak dollar makes U.S. commodities more attractive to foreign buyers.
Yet high prices may be reducing demand for corn. Export sales of 349,000 tons for delivery before the end of the crop's marketing year on Aug. 31 were down 43% from the previous week and 65% from the prior four-week average.
"Because we had this spike in prices for several weeks in a row, it has had the opportunity to slow the demand side," said Mike Zuzolo, president of Global Commodity Analytics & Consulting, a brokerage in Indiana.
For wheat, rains are expected to bring relief to dry growing areas in the U.S. and Europe. Russia's agriculture ministry said the country's spring planting campaign was picking up speed after early delays due to poor weather.
"I think it's improving weather, not only here in the U.S., but extending across the globe, that is pushing prices lower," said Terry Reilly, grains analyst for Citigroup in Chicago.