U.S. soybean futures held firm Tuesday on bargain buying from 3-1/2-month lows the previous session, aided by a weak dollar and signs of Chinese purchases at cheaper prices.
Gains were pared and the market ended well below the session highs on a lack of fresh buying interest in choppy dealings in a session marked by a lack of conviction for either a bullish or bearish stance.
Trade sources said commodity funds sold only an estimated net 1,000 contracts of Chicago Board of Trade (CBOT) wheat futures and were even in corn and soybeans.
By comparison, the funds sold 12,000 corn contracts on Monday and sold 8,000 soybean contracts, the trade sources said.
Corn was firm, while wheat eased slightly for the third straight day and each commodity attempted to stabilize from a steep slide on Monday that was tied to investor long-liquidation from record-high prices reached during a drought-fuelled buying spree.
The worst drought in more than 50 years trimmed U.S. corn and soybean production prospects over the summer, leading to the fund purchasing and price bulge. Markets are now adjusting or correcting from that buying euphoria.
"The focus is on beans. They're trying to find support and/or stabilize around the US$15 level and there are rumours China bought three to five cargoes of beans," said Rich Nelson, chief strategist for Allendale Inc.
The U.S. Department of Agriculture (USDA) on Tuesday reported a sale of 110,150 tonnes of U.S. soybeans to an unknown destination. Traders said the sale likely was made to China, the world's biggest buyer of soybeans.
"The dollar is down and that's helping too," Nelson said.
The dollar index fell about 0.5 per cent and the euro rose to a four-week high against the yen and sterling, while German Bund futures fell.
Traders cited a media report that Germany was open to a precautionary line of credit for Spain.
A weaker dollar makes U.S.-produced commodities a better buy for major importers.
CBOT November soybeans were up 1-1/4 cents per bushel at $14.93-3/4. CBOT December corn was up one cent per bushel at $7.38-1/4 (all figures US$).
Wheat buying rattles spread
Wheat also fell on hesitant investor demand for commodities but high-protein spring wheat futures were lifted by signs China was buying more spring wheat than usual.
High-protein spring wheat traded on the Minneapolis Grain Exchange (MGEX) gained 3-3/4 cents relative to the lower-protein winter wheat traded on the CBOT.
Wheat traders said news that China was buying spring wheat from Canada helped buoy the spring wheat market.
The premium of nearby Minneapolis spring wheat futures over Chicago soft red winter wheat rose to nearly 77 cents per bushel, the highest level in 2-1/2 months.
CBOT December wheat was down 1/2 cent per bushel at $8.47-3/4 and MGEX December wheat was up 3-1/2 at $9.24-1/2.
Market bulls in soybeans cite the tight stocks of soybeans and oversold technicals while market bears cite the potential for a bumper South American harvest next year and say the November contract is destined to drop nearly another 25 cents to key chart support.
Investor liquidation of long positions and profit-taking on Monday drove the bellwether November soybean contract to a 3-1/2-month low and into oversold territory on technical charts.
Chart-based traders said the contract needed to go low enough to fill a gap on charts that was left in early July which would peg key support at the $14.75 area, which is the bottom of the gap.
The nine-day relative strength index, a barometer of oversold or overbought technicals, fell on Monday to 27.6, below the benchmark 30 level generally considered an oversold point.
-- Sam Nelson covers grain and oilseed markets in Chicago for Reuters. Additional reporting for Reuters by Rod Nickel in Winnipeg.
China buys at least 295K tonnes of Canadian spring wheat, Oct. 16, 2012