Soybeans fell 1.7 per cent on Tuesday for their biggest two-day selloff in seven weeks as a record pace in the harvest and expectations of improved yields following late summer rains suggested the market may have seen its 2012 highs.
Analysts monitored technical charts for any sign that the market will repeat what it did this time last year -- erase about 20 per cent of its value between the start of September and early October when the soybean crop was being harvested.
Wheat and corn futures fell one per cent under pressure from soybeans, after moving between minor gains and losses most of the session in the absence of fresh fundamentals.
Market action was centered in soybeans, as it was on Monday, when prices tumbled the daily trading limit of 70 cents -- about four percent -- on anecdotal accounts that Midwest harvest yields are better than expected.
A Reuters poll of 14 analysts on Tuesday put the soybean yield at 35.85 bushels per acre, up from the government's latest forecast of 35.3 bushels on Sept. 12.
The surprising yields are leading some analysts to predict that soybean ending stocks will not dip below the psychologically important level of 100 million bushels. The U.S. Department of Agriculture has forecast stocks at 115 million bushels by next summer.
"There is a discussion of stronger production and ending stocks not falling below 100 million bushels," said Rich Nelson, chief strategist at Allendale Inc. in McHenry County, Illinois.
"The market does not have the bullish argument anymore. The highs are in for the year," he added.
With soybean prices soaring 30 per cent after the worst drought in half a century began showing its teeth in June, the rally to a record high of $17.94-3/4 per bushel on Sept. 4 primed the market for a major correction, some analysts said (all figures US$).
But others have set price targets at $20 per bushel in the coming months on expectations for a short crop and USDA projections that the stocks-to-use ratio, a measure of demand, will be the tightest in five decades.
And it will be another four to five months before soybeans harvested in South American agricultural powerhouses Brazil and Argentina are ready for shipment to global markets.
Tuesday's decline was also fed by concerns that soybean demand from top importer China is set to wane, a surge in the pace of U.S. hog slaughter, and fading optimism over the Fed's latest steps to stimulate the economy, analysts said.
"There has been a convergence of negative news," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.
He said some investors may be reducing their risk exposure due to escalating tension between China and Japan -- Asia's top two economies -- over a maritime dispute.
"Drought issue is over"
"Speculators want to get the hell out," said commodities broker Shawn Hackett, president of Hackett Financial Advisors and publisher of the Hackett Money Flow report.
"The drought issue is over and yield is looking better than expected and demand is waning," Hackett said, adding that he sees prices heading even lower, to a range of $14.50 to $15 per bushel, as part of the correction over the next one to two months.
The U.S. Department of Agriculture's weekly crop progress report on Monday showed that 10 per cent of the soybean harvest was complete as of Sunday, just ahead of the nine per cent expected by 11 analysts polled by Reuters.
The corn harvest was 26 per cent complete, topping expectations for 24 per cent, as the corn and soybean harvests advanced at a record pace in the world's top grains exporting country.
Chicago Board Of Trade (CBOT) November soybeans fell 1.7 per cent to end at $16.40. December corn futures ended one per cent lower at $7.40 per bushel.
December wheat fell 1.7 per cent to $8.63-1/2 per bushel after gaining one per cent earlier.
November milling wheat in Paris was 0.4 per cent at 259.25 euros a tonne, erasing earlier gains.
Analyst Bill Nelson of Doane Advisory Services said there were expectations that Chinese imports of U.S. soybeans would decline. A surge in the number of hogs slaughtered in the United States also pointed to less demand.
Nelson said some investors might be reducing their risk exposure in the wake of escalating trade tension between the United States and China, with both countries filing complaints with the World Trade Organization.
-- K.T. Arasu writes for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson in Chicago, Gus Trompiz and Valerie Parent in Paris and Colin Packham in Sydney.