The ideas that the US Department of Agriculture is poised to lift forecasts for grain inventories only gathered strength over Monday.

In fact, it was difficult for commodities to make headway anyway, given poorly-received Chinese trade data, showing declines in both exports and importers for a country which is a huge consumer of raw materials.

The CRB commodities index dropped 0.5%.

But grains did worse, with corn for March delivery dropping 0.8% in Chicago to $7.30 a bushel, and March wheat falling 1.4% to $8.48 ¾ a bushel – its lowest finish since July.

Cold and snow

Indeed, wheat's worsening technicals, with price slippage testing the floor of the trading range futures have trod for some five months, were viewed as largely to blame for the extent of its slide, despite some fundamental news which might have been deemed supportive.

The US weather outlook is a mixed bag, with cold conditions on their way, potentially testing dryness-challenged winter wheat seedlings, but some snow/moisture in the mix too for at least part of the US Plains, where drought issues are most pronounced.

By December 14 a low pressure formation "will be centred over central or eastern Kansas and tracking up towards the Great Lakes," weather service WxRisk.com said. 

"This low could bring several inches of snow to portions of the central Plains and the western Corn Belt, possibly even to Chicago."

'Looks dry for the next three days'

Export news appeared largely supportive, with the USDA revealing the sale of 115,000 tonnes of wheat to Egypt, the world's top importer.

Furthermore, US weekly exports, as measured by cargo inspections, were OK, at 13.9m bushels, if down from 14.6m bushels the previous week.

 And Argentina is reported to have, or be about to, cut its ceiling for wheat exports to 4.5m tonnes, from 6m tonnes, thanks to a rain-beset harvest - although a drier spell is blessing farmers at teh moment.

"All of Argentina looks dry for the next three days as does most of western and central Paraguay," WxRisk.com said, if foreseeing rains returning next week.

'Overly optimistic'

Even so, it was not enough to impress investors.

"The wheat market fretting that international buyers have completed their January buying," said Richard Feltes at RJ O'Brien, adding that corn prices were being "pressured by reports that Asian buyers largely covered through February".

And then there is the prospect of a USDA upgrade in its Wasde to the USDA estimate for wheat stocks, even if analysts expect a rise of only 8m bushels, to 712m bushels.

Will that prove too low?

"Given that crop prices are generally lower, one can conclude the average trade estimates are being seen as overly optimistic and that ending stocks forecasts are more likely to be above what's expected than below," broker Doane said.

Disappointment against forecasts

Corn's better performance reflected technical signals which were not quite as negative, with the grain remaining well-ahead of the September levels revisited last month.

Furthermore, "there are still many that feel that US corn export sales," which have made a dismal start to 2012-13, "will pick up substantially after the first of the year as the South American supplies have dried up", Darrell Holaday, at broker Country Futures, said..

"But this has been expected over the last 30 days and the results have been way less than poor."

Indeed, weekly cargo inspections came in at 7.9m bushels – less than one-quarter of those a year before.

And South Korea, a major corn buyer, excluded US supplies from its latest tender.

Speculative positioning

Also to factor in was a "big gain" in managed fund long positions in corn, "which are now nursing losses", Mr Feltes said.

The net long in Chicago corn held by managed money, a proxy for speculators, rose by nearly 22,000 lots to more than 279,000 contracts, the CFTC market regulator said late on Friday.

This suggested to some investors overbuying of a grain whose US inventory numbers are expected to be nudged up 16m bushels to 663m bushels in the Wasde.

Meanwhile, Macquarie also struck a blow for bears by estimating a drop in corn futures to $4.50 a bushel by the close of 2013, the lowest since 2010, and some 30% below the futures curve.

Firm beans

It was left to soybeans to fly the flag for bulls, which it managed without any great elevation, adding 0.2% to $14.74 ¾ a bushel in Chicago for March delivery.

And, after all, the Wasde is to cut estimates for US inventories of the oilseed, as of the close of 2012-13, by 10m bushels to 130m bushels, according to a Reuters survey of analysts' expectations.

The forecast of reduced stocks reflects strong domestic demand, of which more will be known on Friday, with the US National Oilseed Processors Association monthly data.

Also, exports continue to impress, with inspections for last week hitting 46.6m bushels, down more than 5m bushels week on week, but well ahead of the 29.9m bushels in the same week a year before.

'Don't see much potential for the upside'

Among soft commodities, New York raw sugar for March tumbled 2.3% to 18.76 cents a pound – the weakest finish for a spot contract since August 2010 – after Unica, the cane industry group, hinted at an upgrade to estimates for the cane crush in Brazil's key Centre South region in 2012-13.

The comment came in a report in which it revealed bumper output in the second half of November, boosted by dry weather which has allowed mills to stay open longer than usual.

The forecast followed an upgrade by Kingsman on Friday to its estimate for the world surplus in 2012-13, besides CFTC data showing speculators have covered many of their short holdings in the sweetener, so reducing the risk of a price spike from a round of position covering.

"With scarce news on off-take," ie end user buying, "and the development of the northern hemisphere beet crops adding to the producer pressure from Thai and Brazil producers, we don't see much potential for the upside for the time being", Nick Penney at broker Sucden Financial said.

Huge crop ahead?

And New York arabica coffee also dropped to a two-year low, the weakest finish since June 2010, a major Brazilian grower and exporter forecast a large 2013-14 crop.

Brazil, the top coffee grower, will produce 53.4m bags of coffee, Terra Forte said, a rise of 2% on the forecast for this year even though next season is an "off" on in the two-year cycle of higher and lower production.

March futures dipped 4.4% to 147.00 cents per pound.

"This move has produced some encouraging volume today of around 18,000 lots, but it has been the case that in recent times that after a surge like this there can be a lull in trading over the next few days," Sucden said.