Cargill speaks. The market listens.

The privately-held corporate giant, renowned as a large but taciturn force in world agriculture, broke silence to urge action on the amount of corn being directed to ethanol, at a time of short supplies which is driving up prices.

The US biofuel mandate, which puts a minimum on use of bioethanol, "needs to be addressed", Greg Page, the Cargill chief executive, told CNBC.

"If all of that [demand rationing] is only on livestock or food consumers, it really makes the burden disproportionate. What we see are 3-4% declines in [corn] supply lead to 40-50% increases in prices."

"There are mechanisms in place… There is a methodology to reduce the amount of biofuels that is mandated in the US."

'Very intentional'

Whether or not the message is heard in Washington, it was in Chicago.

"Cargill people do not normally make public statements like this unless they are well-timed, well placed, and very intentional," Rich Feltes, at Chicago-based broker RJ O'Brien, told Agrimoney.com.

Corn lost gains to close 1.5% lower at $8.06 ½ a bushel for August delivery as traders added increasing weight to ideas that US authorities might indeed reduce the ethanol mandate, action demanded too on Monday by an alliance of livestock groups.

The best-traded December lot, which earlier set a contract high of $8.20 ½ a bushel, ended down 0.9% at $8.05 ¼ a bushel.

'Some exportable surplus'

That hardly did any favours to wheat, which was already struggling, for reasons which many found hard to fathom, given increasing concerns over the former Soviet Union crop.

Sure, US Department of Agriculture staff pointed out the rich inventories of wheat which Kazakhstan will possess to export in 2012-13, despite a disappointing crop.

But hopes for Russia's crop faded as the agriculture ministry narrowed to 80m tonnes, from 80m-85m tonnes its forecast for the country's grains harvest, while Interfax said that ministry papers indicated the figure could yet go lower still, to 75m tonnes if dryness persists.

While Dmitry Medvedev, the Russian prime minister, said that Russia will maintain "some exportable surplus" of the grain, there are doubts as to how large that will end up being.

US Commodities said: "Russian wheat continues to decline as exports may fall below 10m tonnes.  This could give the US wheat a boost in the future."

'I am mystified'

Still, it wasn't in pricing terms yet, with Chicago wheat for September finishing 2.6% lower at $8.88 ¼ a bushel.

Some analysts said that the decline may be down to the fact that wheat has gained too much of a premium over corn to work its way back into feed rations in place of the yellow grain.

Chad Henderson at Prime Ag Consultants said: "Wheat is falling because no one can figure out why it rallied to $9.50 [a bushel] to begin with."

Not so fast, said RJ O'Brien's Rich Feltes, who flagged a seasonal performance gap between the two grains from mid-August, when wheat, freed from harvest pressure, tends to outperform corn.

Furthermore, with the former Soviet Union crop woes, and doubts over Australian and European crops too, "wheat is developing its own story", he told Agrimoney.com.

"I am mystified over this selling pressure," he added, but noted forecasts for rain in Argentina, where dryness has raised concerns over seedlings.

Soybean-grain spreads

There were a couple of other factors to take into account too, including the date, it being the last day of the month, a time when funds by repute close positions and tidy up portfolios to raise cash to pay retiring investors and so on.

Then there were questions about the competitiveness of US exports, after Jordan bought 100,000 tonnes of Ukrainian wheat for November ship at $344  per tonne.

"That's $30 a tonne cheaper than nearby US offers," FCStone's Mike O'Dea said.

Another one was investors taking long soybean-short grain bets, betting on demand for the oilseed from the US, following disappointing South American crops besides the US drought, keeping it outperforming.

"There has been a significant amount of soybean-corn and soybean-wheat spreading today," Darrell Holaday at Country Futures said.

'We have hit D Day'

The spark for this spreading to happen now was potentially the continuing deterioration of the US crop, confirmed in official data overnight, at a time when soybeans are increasingly following corn in suffering irreversible damage.

"We have hit D Day when it comes to soybean yield," Mr Holaday said, noting that 57% of soybeans in Iowa were not seen at the sensitive pod-filling stage.

"Bottom line is that we do not have all of August. We are in the final stages of the reproductive stage and in the next two weeks, it could be all over in the soybean crop.

"In other words, it will be what it is in two weeks."

Weather outlook

And weather forecasts were hardly benign.

"The midday GFS weather model really did not hold any great promise," Mr Holaday said.

"There is some rain showing up six-to-10 day outlook out in the central and eastern Corn Belt. It also points to cooler temperatures in the Corn Belt."

The problem is the EU model, which has proven itself more accurate, "remains warm and dry".

Soybeans ended lower, but not by as much as the grains, with the August lot easing 0.3% to $17.21 a bushel, and the best-traded November lot by 0.2% to $16.41 a bushel.

In Paris, oilseed peer rapeseed eased too, by 0.1% to E502.75 a tonne, receiving pressure too from an Oil World upgrade to 19.0m tonnes in its estimate for the European Union rapeseed crop.

Negative signal

Many soft commodities also struggled, with New York raw sugar futures dropping 0.7% to 22.64 cents a pound for October delivery after a meeting on drought by Indian ministers, following a poor start to the monsoon, ended without indications of curbs on exports of the sweetener.

Furthermore, technically, sugar's chart may be turning negative.

"The chart technicians are starting to rub their hands it seems at the developing potential head-and-shoulders pattern developing in the price action," Thomas Kujawa at Sucden Financial said, adding that "there seems to be a potential head-and-shoulders top developing in nearly all commodity charts at the moment".

"It seems from technicians' perspective there is more of a downside risk at the moment."

'Greater difficulty in financing'

Arabica coffee fell 2.1% to 174.40 cents a pound in New York, for September delivery, as data from Brazilian co-operative giant Cooxupe revealed progress in its farmers' harvest, which passed the half way mark, reaching 51.4% completed as of Saturday, up from 42.9% a week before.

Silas Brasileiro, executive president of Brazil's Conselho Nacional do Café coffee council, has also noted the negative impact on prices from the eurozone crisis.

"European roasters are having greater difficulty in financing, which causes a reduction in their purchases," Mr Brasileiro said, adding that they were buying supplies "only for very short-term use".

Data from the International Coffee Organization showed a continued recovery in world coffee exports, to 9.58m bags last month, up from 9.11m bags a year before.

However, the revival has been led by robustas, with arabica shipments down 6.2% so far in 2011-12.

Cocoa did better, rising 1.5% to $2,376 a tonne in New York, for September, helped by a positive chart sign after the lot finished the last session above its 200-day moving average.