Financial markets, like nature, abhor a vacuum, so traders say.

Wednesday came up with evidence to prove them right, in seeing Chicago corn and soybean futures fill in gaps in their charts, and fuelling a deep decline in prices in the process.

It was hardly a promising day for agricultural commodities anyway, once a profit-warning by Caterpillar, the US construction vehicle giant, and anti-austerity demonstrations in Greece were taken touched febrile inventor nerves.

There was Spain to factor in too, witnessing its own anti-austerity protests, besides a central bank caution that data suggest the country's gross domestic product contracted at a "significant rate", and Catalonia announcing a snap election seen as raising the likelihood of secession.

'Entire commodity sector is lower'

Shares struggled, falling by 1.6% in London and 2.8% in Paris.

And, unhelpfully for dollar-denominated exports such as many commodities, the greenback added 0.4% against a basket of currencies.

The average commodity, as measured by the CRB index, lost 1.0%.

"The riots today in Greece along with another surge in Spanish bond yields has put the euro currency on defensive and rallied the US dollar," Darrell Holaday at Country Futures said.

"The entire commodity sector is lower."

Long list of negatives

It was hardly surprising that many agricultural commodities did worse, given the range of fundamental factors encouraging funds to liquidate large net long positions they still have in some crops, such as corn and notably soybeans, which still remain at historically elevated prices.

"Brazil rains, US harvest pressure, fund liquidation, outside market pressure and negative seasonal factors team up with fear of a bearish crop report on Friday to push row crops to new lows of the move," was how Richard Feltes at RJ O'Brien summed it up.

"There are still 10 days until the October Wasde crop report with the void peppered by quarter end, November soybean futures fund roll, accelerating harvest and renewed unease in the European Union.

"We don't see catalyst as yet to pick bottoms."

In other words…

To unpack those comments a bit, row crops face a background anyway of harvest pressure – weight on prices from farmers selling off the combine have been offering a reprieve to buyers worried about the prospect of tight inventories following drought-hit South American and US harvests.

But adding to it are not just the external economic worries, but rains in Brazil easing concerns that a particularly dry dry season in central soybean areas would get sowings off to a bad start for a crop whose harvest in early 2013 is being widely anticipated as a potential cure for weak global supplies.

Furthermore, the US Department of Agriculture will at the end of the week unveil a crop inventory briefing expected to be downbeat for prices in revealing relatively healthy supplies as of September 1 (although the picture will be clouded by the impact of an early harvest).

And the soybean market also faces the challenge of handling its expiry process which, while not kicking off for another month, is expected to see funds sell down positions in the lot well ahead, while liquidity is relatively high.

'Prices are still too high'

Meanwhile, corn had idiosyncratic challenges too, besides more bearish comments from Societe Generale, given a continued weak US export performance.

"Yesterday South Korea bought 133,000 metric tonnes of corn from South America for February delivery," Steve Georgy at Allendale said.

"This is concerning for the bulls because this means our prices are still too high."

US Commodities also noted that "South American corn remains well under US values.

"In August, corn values were $1.00 a bushel under US values and now $1.25 a bushel under US values. The US is not competitive on corn in the world markets."

Over the cliff

So it was hardly surprising that markets took corn and soybeans to the edge of their chart gaps, at around $7.32 a bushel and $15.87 a bushel respectively on continuous charts.

And once over the precipice, there was little technically to stop both crops falling to the bottom of their chart voids.

Chicago corn bottomed out at $7.22 ½ a bushel before edging higher to close at $7.24 ¾ a bushel, down 2.4% on the day, and the lowest finish for a spot contract since early July.

That is some $1.20 a bushel cheaper than the price the grain reached at its peak last month.

Technical signal

Soybeans for November recovered some ground to end at $15.73 a bushel, a decline of 2.3%, and also the lowest close for a spot lot since July 3.

However, signally, that was not enough to prevent the oilseed closing below its 100-day moving average, on a continuous chart, for only the second time since January.

Crossing below that mark was a negative signal for funds, who sold an estimated 12,000 soybean contracts and 15,000 corn lots on the day.

Chicago wheat escaped relatively lightly, with a 3,000 lot sell-off.

International comparisons

But then wheat did have some points in its favour, and not just the relatively small long positions funds have potentially to sell.

The latest Egyptian wheat tender result confirmed that US wheat is now far more competitive than Russian supplies in exports, and not far off parity excluding shipping charges with the European Union supplies which won the 300,000-tonne order.

French wheat accounted for most, helping Paris milling wheat for November sidestep the market sell-off and close level at E261.25 a tonne.

London feed wheat fared less well, and dropped 1.6% to £200.80 a tonne for November delivery.

Nonetheless, with rain boosting prospects for sowings of the US winter wheat crop for 2013 harvest, that was better than Chicago's December lot, which dropped 2.0% to $8.69 ¼ a bushel.

Nearing lows?

It should be said that there is still hope for better times for row crops ahead, once harvest pressure is out the way, which for soybeans could be soon.

The first week of October is seen as a period when soybean futures typically hit bottom.

"Seasonally, we are nearing lows for soybeans," US Commodities said.

Benson Quinn Commodities said that while "these markets are susceptible to further downside price action, lower trade is limited from these prices".

'Trading proving difficult'

The sell-off extended to soft commodities too, with cotton, ever susceptible as an industrial commodity to the macroeconomic mood, shedding 1.8% to 71.02 cents a pound in New York for December, the lot's lowest close since early August.

And New York coffee for December dropped 2.4% to 169.45 cents a pound, facing further pressure from mounting inventories at the Ice exchange.

At 2.12m bags, they reached their highest since June 2010.

"Trading over the last few sessions certainly is proving difficult, and I guess that is why as we come close to the end of the quarter books will be closed and punters will wait until the new quarter," Sucden Financial said.

'Third successive production surplus'

Raw sugar dropped too, for the first time in five sessions, by 1.5% to 19.57 cents a pound for New York's October contract.

The better-traded March lot dropped 1.6% to 20.38 cents a pound.

Commerzbank flagged the potential for a recovery in values, given the prospect of disappointing Indian and Brazilian output.

However, "the global market, which is amply supplied, is unlikely to permit any sharp climbs in price".

Indeed, "the prospect of a third successive production surplus, one which in 2012-13 is likely to be particularly high at 5.9m tonnes, remains", the bank said.