U.S. wheat futures fell to a five-month low on Tuesday after the U.S. Department of Agriculture raised its forecasts for U.S. and global wheat inventories to levels that topped trade expectations.
Wheat's 3.2 per cent plunge pulled down corn and soybeans, with corn hitting a three-week low.
At the Chicago Board of Trade, benchmark March wheat settled at $8.21-1/2 per bushel, down 27-1/4 cents or 3.2 per cent, its biggest daily loss in a month. Front-month December wheat dipped to $8.01-3/4, the lowest spot price since July 11, before settling at $8.05-3/4.
CBOT March corn ended down two cents at $7.28 a bushel, while January soybeans fell 2-3/4 cents to settle at $14.72 a bushel.
The grain markets ignored strength in outside markets including crude oil and U.S. equities, focusing instead on fundamental monthly crop data from USDA.
The government raised its forecast for U.S. 2012-13 wheat ending stocks to 754 million bushels, which was at the high end of trade expectations and up from its November estimate of 704 million bushels, reflecting a slow pace of export sales.
"Exports are much more important to wheat than to corn or soybeans. And we are just not selling it," said Bill Gary, president of Commodity Information Systems in Oklahoma City.
USDA also raised its forecast for 2012-13 global wheat inventories to 176.95 million tonnes, up from 174.18 million in November and above trade estimates that ranged from 170 million to 175.68 million.
Traders noted USDA raised its forecast for Australia's wheat crop to 22 million tonnes from 21 million in November. It left its forecast for the Argentine wheat harvest unchanged at 11.5 million tonnes, despite heavy rains that have swamped fields there.
"World wheat numbers seem to be more of an increase than people were looking for," said Jack Scoville of the Price Futures Group in Chicago.
Jim Bower, president of Bower Trading in Lafayette, Indiana, said he expected USDA eventually would lower its estimate of the Argentine wheat crop.
"In the final analysis, that needs to come down near 9.5 million to 10 million tonnes. It was too wet for too long, over too big an area to keep that crop unchanged," Bower said.
Corn dragged lower
Corn followed wheat lower, but losses were limited because USDA left its forecast for U.S. 2012/13 corn ending stocks unchanged at 647 million bushels, a 17-year low that was below the analysts' average estimate of 663 million.
USDA caught some traders off-guard by leaving its estimate of 2012-13 U.S. corn exports unchanged at 1.15 billion bushels, despite a sluggish pace of sales. Analysts had expected a drop in USDA's export forecast that would raise ending stocks.
"The biggest surprise is that there were no changes made to corn demand here," said analyst Rich Nelson of Allendale Inc. at McHenry, Illinois.
"It is certainly disappointing to see the USDA put this off until the January report," Nelson added. "We were expecting some clear declines in exports."
USDA raised its estimate of China's 2012-13 corn crop to 208 million tonnes from 200 million in November, based on record yields for the world's No. 2 producer. But USDA left its forecast of China's corn ending stocks unchanged at 60.14 million tonnes.
USDA trimmed its forecast for Argentina's corn crop to 27.5 million tonnes from 28 million in November, but that is still above the average trade estimate of 26.021 million tonnes.
Soybeans follow grains down
Spillover pressure from wheat weighed on soybeans, offsetting fundamental support from USDA's soybean data.
The government cut its forecast of U.S. 2012-13 soybean ending stocks to 130 million bushels, in line with trade expectations and down from 140 million in November. If realized at the end of August, the soy ending stocks figure would be the smallest in nine years.
The tighter stocks view reflected strong demand from domestic soybean processors, who are earning historically high profits from crushing soybeans into soybean meal and soybean oil.
Additional market support stemmed from USDA's confirmation that private exporters reported a sale of 115,000 tonnes of U.S. soybeans to China, the world's top soy buyer, for delivery in 2012-13. But the declines in wheat overshadowed the early strength.
Also bearish were expectations for a massive South American soy harvest starting in early 2013. The USDA left unchanged its forecast of soybean production in Brazil at a record-high 81 million tonnes. Its Argentine soy crop forecast also was unchanged at 55 million tonnes.
-- Julie Ingwersen covers agricultural commodity markets for Reuters in Chicago. Additional reporting for Reuters by Nigel Hunt and Sarah McFarlane in London.