U.S. soybeans and corn fell on Thursday as the brisk pace of the domestic harvest and global economic worries dampened investor sentiment after drought lifted prices to record highs this summer.
The lower prices triggered further selling based on technical indicators, taking soybeans down three per cent to a six-week low and knocking corn down 1.4 per cent.
Wheat followed them lower, but underpinning support from dryness concerns kept its losses modest.
The fall halted a two per cent rebound in grains seen on Wednesday, when soybeans drew bargain buying after enduring their steepest two-day slide in seven weeks in a burst of liquidation by funds.
A rapid start to the U.S. soybean harvest and reports of better-than-expected yields weighed on markets, even though analysts believe U.S. and global supply will remain extremely tight after the worst drought in the United States in half a century slashed yield potential.
"We've got kind of a perfect storm right now in the market," said Karl Setzer, market analyst at MaxYield Co-operative. "You've got funds holding long positions and taking some profit, we've got a breakdown in the technicals and we really don't have any fresh, new fundamental support."
Occasional light rain showers in the Midwest will cause only minor slowdowns in the corn and soybean harvest that is off to a record-fast start this year, an agricultural meteorologist said on Thursday.
"All in all it looks like a pretty decent harvest scenario," said John Dee, a meteorologist for Global Weather Monitoring.
Talk of better-than-anticipated U.S. yields has reinforced hopes that late summer rains arrived in time to benefit later-planted crops.
"Ultimately, there's harvest pressure going on," said Justin Lewis, vice president of KIS Futures Inc in Oklahoma City.
The market is also closely watching corn and soybean planting conditions in South America, where production will replenish global supplies in early 2013.
"The big fear for everyone is South America was going to be dry. Well, they're getting plenty of rain for now, and if that happens, there is not a real big scare that the world's going to run out of corn and soybeans in the spring," Lewis said.
China's slowing imports and expectations for continued selling of soybeans from its state reserves have also encouraged the price pullback.
Weak Chinese and euro zone data pushed equity markets lower and helped strengthen the dollar, putting extra pressure on commodities traded in the U.S. currency.
Chicago Board of Trade (CBOT) November soybeans lost three per cent, or 50-3/4 cents, settling at $16.18-3/4 a bushel. Traders said the drop triggered orders to sell at $16.30-1/2 (all figures US$).
China, which buys about 60 per cent of globally traded soybeans, will carry on selling soybean reserves well into 2013 to contain food inflation and tight global supply, traders said.
China imported 4.42 million tonnes of soybeans in August, the lowest monthly level in six months, as record-high prices and reduced world supply cut demand.
CBOT December corn fell 1.4 per cent, or 10-1/2 cents, to $7.46 a bushel, matching Monday's low at $7.39, which was the weakest price in more than two months.
CBOT December wheat eased 0.2 per cent, or two cents, to $8.79-1/2.
The winter wheat crop in the southern U.S. Plains needs rain to establish itself and conditions are dry in Australian wheat-producing areas, said Dan Manternach, ag services director for Doane Advisory Services.
"The bullish unknowns about the 2013 (wheat) crop are still there," he said.
Wheat operators are scrutinizing export demand at a time of depleting stocks in Russia, the world's fourth-largest exporter, after its drought-hit harvest.
Iraq's state grains board purchased 150,000 tonnes of Russian-origin wheat in an international tender on Wednesday, although operators are convinced Russia will soon fade from export markets.
-- Rod Nickel
writes for Reuters from Winnipeg. Additional reporting for Reuters by Sam Nelson in Chicago, Gus Trompiz in Paris and Naveen Thukral in Singapore.