US grains: drought rally retreats as chances for rain improve

US grains extended losses today in a pullback to the blistering drought rally, with soybeans leading markets down as better chances for rain this week could help the crop while it goes through the crucial phase of setting yields.

Spot August soybeans tumbled nearly 4 percent as traders exited their positions before the contract's expiry on Aug. 14, but volume was relatively thin at about 8,000 contracts.

Corn futures fell more than 2 percent after chalking up the biggest two-month rally since the last major drought in 1988, gaining 45 percent through June and July due to the drought.

Wheat futures fell sharply for a second straight session after leading exporter Russia quashed market speculation that the country would curb exports due to a poor harvest this year, and France raised its wheat crop estimate.

Meteorologists said there were chances for rain through the weekend in the Midwest farm belt, where the worst drought in 56 years rallied corn and soybean futures at the Chicago Board of Trade over the past seven weeks and set record highs last month.

The rain could benefit soybeans, which will be setting pods the next two weeks – a crucial phase in their reproductive cycle that determines yield and final production.

Agronomists had said that the hardy soybean crop needs just a fifth of the rain corn needs due to its much smaller biomass and that timely rains could help soybeans flourish.

Corn and wheat prices have risen about 50 percent since mid-June and soybeans about 20 percent as the drought devastated the crops.

September wheat fell 2.4 percent to $8.67-1/4 a bushel, adding to its Tuesday's decline of 2.9 percent.