U.S. grain futures dived on Friday, with wheat falling 3.3 per cent for the biggest loss in more than a week, on the lowest export sales in months and traders locking in profits after big gains earlier this week.
Soybean futures also dipped, posting their fourth straight weekly decline, one day after the U.S. Agriculture Department raised its soy production forecast and cut its ending stocks estimate in a report that send the grains complex soaring.
The government also pegged the U.S. corn crop as smallest in six years after the worst U.S. drought in a half a century reduced yields. Domestic use of wheat was expected to be at its highest level since the 1998-99 marketing year.
A London hedge fund was said to be reducing its exposure in grain markets in favour of other assets, which added further pressure to agriculture commodities, trade sources said.
"Obviously people are taking profits and we're back to reality. The report confirmed we have tight supplies, but the cash market is not responding," said Christopher Narayanan, head of agriculture commodities research at Societe Generale in New York.
"The post-WASDE euphoria has worn off," Narayanan added, referring to the USDA's monthly World Agricultural Supply and Demand Estimates report.
In its weekly export sales report released early on Friday, USDA pegged export sales of all varieties of U.S. wheat as the lowest in four months and soybean exports the lowest in two months.
Exports of U.S. corn totaled a mere 14,200 tonnes, compared with 1.3 million tonnes in the same week last year. Sales of all three commodities were below analyst expectations.
"You think there is some room for some exports and it's just not happening. With some of the run-up we've had, the market was ripe for some bursting of the bubble," said Tim Emslie, research director the brokerage Country Hedging.
Wheat futures led the way down at the Chicago Board of Trade (CBOT), falling 29-1/4 cents to $8.56-3/4 per bushel, wiping out all of the gains from earlier this week.
CBOT December corn ended 20-1/2 lower cents at $7.52-3/4, gaining less than one per cent for the week after rallying five per cent on Thursday to a three-week high.
Soybeans for November delivery settled down 26 cents at $15.22-1/2 per bushel, shedding 1.7 per cent in the session and nearly five per cent for the week. Soy prices have declined more than 15 per cent since hitting a record of $17.94-3/4 in September.
Investment funds were said to have sold 15,000 corn contracts, the most in about two weeks, as well as 10,000 soy contracts and 4,000 wheat contracts.
Largely beneficial weather for planting in South America also pressured the soy market. Brazil and Argentina, the No. 2 and No. 3 soy producers behind the U.S., were likely to seed large areas to take advantage of historically high prices.
Light showers were noted in northern Brazil with only eastern Mato Grosso region receiving any significant rainfall and there will be scattered showers in Mato Grosso this weekend, said Joel Widenor, meteorologist at Commodity Weather Group.
-- Michael Hirtzer
writes on commodity grains and livestock for Reuters from Chicago. Additional reporting for Reuters by Karl Plume and Sam Nelson in Chicago.