Bears lost their grip on grains on Wednesday, but tore an extra claw into soft commodities.
December cotton futures, which fell the exchange maximum of 4.0 cents a pound in New York in the last session, lost even more this time (on a widened trading limit).
The contract finished down 4.62 cents, or 5.2%, this time, at 84.24 cents a pound, a one-month closing low.
Hedge funds liquidate
The plunge took its losses so far this week to nearly 10%, a decline attributed to a surprise improvement in US crop conditions, as unveiled in official data on Monday, and growing hopes for the Indian harvest too, following generous monsoon rains.
Lenzing put an extra boot into the cotton market by forecasting high world cotton stocks for three years, and a weak market for cellulose-based fibres such as viscose, the cotton rival which it manufactures.
And fuelling the price decline has been a mass liquidation by hedge funds, which as of last Tuesday held a net long of 79,292 contracts in cotton futures and options, the highest in nearly three years.
"There is a good chance that speculative investors will currently be reducing their net long positions again following the sharp increase in the previous week," Commerzbank said.
"Perhaps they are realizing once again that marked price rises do not leave demand entirely unscathed."
Real weakens again
Elsewhere in New York, cocoa for December dropped 2.8% to $2.450 a tonne for December delivery, a decline blamed on profit-taking after the contract in the last session hit a nine-month high on fears for the Ivory Coast crop.
And the Brazilian real set out a negative backdrop for futures in arabica coffee and raw sugar, of which it is the top producer and exporter, by softening again, this time to R$2.4516 to $1 at one point, the weakest since December 2008.
With FCStone revealing upbeat estimates for Brazil's coffee harvests in both 2013 and 2014, and JM Smucker also seeing little hope of a price revival, arabica beans for September dropped 13% to a fresh three-year closing low for a spot contract of 113.50 cents a pound.
The better-traded December lot shed 1.4% to 117.15 cents a pound.
Sellers at least held off a little in raw sugar thanks to the prospect of the next industry data on the Brazilian Centre South crush, expected imminently.
Still, New York's October lot dropped 0.8% to 16.32 cents a pound.
'Adding risk premium'
The contrast was marked with the mood in grain and oilseed markets which, continuing a recent pattern of alternative higher and lower sessions, managed gains.
These were attributed largely to a less-than-ideal weather outlook, although, as ever, interpretations of the outlook were mixed, in part thanks to stress on different time horizons.
Allendale reported that "the short term forecasts have put a little rain in the northern Corn Belt with a better chance late, next week".
US Commodities, however, said that "the market is adding risk premium due to the warm/dry forecast", an idea which seemed more in line with consensus thinking.
"This morning's forecast has reduced moisture for key dry areas and helped ignite the rally."
'The heat is on'
At Country Futures, Darrell Holaday said that "the early morning run of the GFS weather model pushed the brunt of the rainfall out of Iowa west into Nebraska", a factor which "sparked a major rally", if one which ended up giving back a lot of its headway.
"The GFS was also indicating a significant pattern change in the August 30- September 2 time period that provides opportunities for rain in the heart of the Corn Belt and the Plains," Mr Holaday said.
"That trimmed the gains."
WxRisk.com put it that "the heat is on this week and next", with some rains due for the next couple of days in the northern Midwest (including northern Illinois), but then giving way to a drier and warmer spell.
"The six-to-10 day outlook looks much hotter over the eastern Corn Belt as all models expand the heat dome /ridge east into the eastern Corn Belt," the weather service said.
'Summer supply scare rally'
Added to this, the mood from the Pro Farmer tour of the Midwest turned decidedly more downbeat as it reached into Illinois and Iowa, the top corn and soybean producing states, where dryness has been an issue.
And there is a growing focus too on the talk of delayed crop development that tour scouts have mentioned which, if autumn frosts strike in a timely manner, represent a threat to the high yield forecasts that have come up with over the last two days.
In short, "we are in a classic summer supply scare rally that has caught the trade leaning bearish," Richard Feltes at Chicago-based broker RJ O'Brien said.
The news was not all upbeat, with US ethanol production falling 13,000 barrels a day last week to 844,000 barrels a day, signalling a hit to corn demand, although this is in a period of maintenance shutdowns.
US ethanol stocks added 57,000 barrels to 16.5m barrels.
Some commentators also cautioned over the lack of competitiveness of US corn exports, especially given the weakness of Brazil's real.
"This increases the competition. Brazil farmers are busy selling the premium in the market," US Commodities said, noting that Brazil's second, or safrinha, crop, the key source of the country's exports, "is now hitting the market".
Darrell Holaday highlighted "just how far away from the world market the rally in corn has made US prices.
"Current US October, December corn offers are $0.72 a bushel below the US Gulf in Ukraine, and the Brazilian offers are $0.32 a bushel below US offers."
Still, Chicago corn for December closed up 1.6% at $4.83 ¼ a bushel, recovering most of the ground lost in the last session.
Soybeans for November added 1.0% to $13.04 a bushel, a two-month closing high, although that finish disguised huge swings, with the contact trading over a range of more than $0.30, and spending some time in negative territory.
'Favourable harvest conditions'
For wheat, volatility was a little larger too, if hardly extreme, and Chicago's best-traded December soft red winter wheat contract settled for a 0.5% rise to $6.49 ¼ a bushel, pulled up by gains in fellow grain corn.
The September lot gained 0.7% to $6.38 ¾ a bushel, although it should be noted that September options expire this week, which may encourage unusual price moves.
While Canada's crop was pegged by Statistics Canada at a 22-year high of 30.6m tonnes, this was more of a factor for spring wheat, which accounts for most of Canada's crop.
Minneapolis spring wheat did fall 0.4% to $7.35 ¾ a bushel for December, a contract closing low, with CHS Hedging also noting pressure from "favourable US harvest conditions".
Paris wheat for November closed up 0.5% at E185.50 a tonne, with London wheat for November doing a little better, adding 0.9% to £155.45 a tonne.
Ideas that the UK faces an unexpectedly large wheat export programme, requiring prices to be marked down to levels competitive with other exporting countries, have taken a little bit of a back seat while ideas on the harvest – and the country's potentially sizeable ethanol output – bed down.