U.S. soybean and corn futures retreated Thursday on modest investor sales after news that China will be selling 500,000 tonnes of beans and 1.2 million tonnes of corn from its state reserves next week.
Wheat moved higher on short-covering by speculators.
The shock of China's announcement seems to be wearing off as corn and soybean markets rebounded solidly off their lows for the day, dealers said. Soybeans hit a seven-month low and corn a 2-1/2 month low.
The old-crop Chicago Board of Trade August soybean contract dropped 32 cents to $9.88-1/2 (U.S.) a bushel at 10:43 a.m. CDT , having traded at a session low of $9.80.
New-crop November soybean futures eased 13 cents to $8.91-1/2.
"It had a psychologically bearish impact on the market," said Vic Lespinasse of GrainAnalyst.com, referring to China's upcoming auction on July 21.
But he said the market is in the process of discounting the news because the Chinese selling prices are too high and there are consequently some doubts about the government's ability to sell the beans.
"Nobody will buy at this price when you can import it cheaper," said the head of the oilseed business at a trading firm in Singapore. Imported soybeans are around $40 to $50 cheaper than the $549 per tonne set by the government, the source said.
One European dealer said there are also questions "whether the Chinese sales are really a tactical move to push prices down to enable soybean purchases to be made at lower prices in coming days."
The view seems to be supported by news that China remains a sizable buyer of old-crop U.S. soybeans, with the U.S. Agriculture Department reporting net weekly export sales of old-crop soybeans to China of 111,200 tonnes, including 55,000 tonnes switched from unknown destinations.
USDA said Wednesday another 113,000 tonnes of old-crop (2008/09) U.S. soy had been sold to China.
U.S. soy supplies for 2008/09 are forecast to fall to 110 million bushels, the lowest in more than three decades. The tight supplies have made for volatile trade in soy futures.
China is one of the world's biggest consumers of soybeans for its huge pig and livestock industry. It has become a heavy buyer of U.S. soybeans after the crop in Argentina, the No. 3 world producer, was battered by drought.
Corn sags, wheat in post-harvest bounce Corn futures tracked the losses in soybeans, but another factor for its weakness is nearly ideal weather in the U.S. Midwest.
"The weather could not be better," said Mr. Lespinasse, adding this factor contributed to the weakness in corn and soybeans as well.
DTN Meteorlogix forecast scattered showers in the area and then cooler temperatures afterward.
Pollination is starting in the U.S. Corn Belt in the remaining weeks of July and the soybean pod-setting period will be starting in August.
Pollination and pod setting are the key factors in setting yields for corn and soybeans in the United States, the world's top producer and exporter of both grains used for livestock and poultry feed around the world.