Bears landed another paw onto the crop market rally on Tuesday, as US weather forecasts turned ideal for corn and soybeans, and wheat investors awaited news on actual crop damage.

External markets were hardly supportive, with shares losing ground after poorly-received earnings reports from IBM, Texas Instruments and, most lately, Goldman Sachs.

The dollar made ground, making dollar-denominated assets, such as many commodities, less competitive.

But traders said that the main thorn in the side of Chicago bulls was the weather, which is set to bring moisture to crops and not the oppressive heat which many had feared would disrupt corn pollination and lower yields.

With this potential ahead, a surprise fall in the corn crop's ratings revealed in latest US Department of Agriculture data was given short shrift.

'Ideal forecast'

"The soaking rains will make it hard to sustain rallies," Benson Quinn Commodities said.

"The current forecast for the next 14 days shows no excessive heat and near to above rainfall.  This is a near-term ideal forecast."

At Country Futures, Darrell Holaday added: "Weather forecasts remain favourable, and the market is gradually pulling out some weather premium."

Furthermore, after the buying spree in the first half of the month, the market has lost much of its potential support from short-covering rallies.

"The funds are bloated with long positions," US Commodities said.

"They have bought 180,000 corn contracts in the last few days.  Yesterday, they sold 12,000 corn contracts."

Whilst it is not clear how many they have sold on Tuesday, it was enough to depressed Chicago's September contract by 1.9% to $3.74 � a bushel in late deals.

The wait...

The losses put further pressure on wheat prices, which stood 0.9% lower at $5.77 a bushel in Chicago for September delivery.

Another factor too was a slowdown in the run of crop downgrades, with Kazakhstan providing a 1m cut to its grain production estimate, but nothing on the scale of the cuts in the European Union and Russia in early July.  

"The bullish news has been priced in," a London analyst told Agrimoney.com.

"Everyone is now waiting for the harvest results, which will set the future direction, up or down."

Mixed results

News on that front has been mixed in the EU so far, with Agritel, the consultancy, reporting that while quality of the important northern French crop "is so far excellent both on the specific weight and on the protein rate, the yield is harder to estimate. 

While many farmers have been "pleasantly surprised", yields "appear generally well below last year" the consultancy added.

"All eyes now turn to the weather and the arrival of a storm wave in France this Wednesday."

Some investors in Europe were not hanging on, with London wheat closing down 1.0% at �125.45 a tonne, reversing earlier small gains.

However, Paris wheat for November crawled back from negative territory to end E0.25 higher at E168.00 a tonne. And this despite Europe losing out, once again, to Russia in an Egyptian wheat tender.

Oilseeds stand firm 

Tuesday's stalwarts were oilseeds, with rapeseed ending E1.75 higher at E360.50 a tonne in Paris, its first rise in three trading days.

But then this is one crop which has very favourable fundamentals, with falls expected in major producers Canada, the EU and Ukraine.

The bigger surprise were soybeans, which stood 0.75 cents higher at $10.08 � a bushel in Chicago, with the new crop November lot down only 2 cents at $9.70 a bushel, well above its intraday low.

With the fine US weather prospects, and the crop in improving shape according to the latest USDA crop condition data, greater weakness might have been expected.

But traders pointed to basis levels which, for soybeans, have proved resilient, unlike those of grains.

'Appetite faded' 

Among softs, coffee was especially so, closing down 3.2% at 158.55 cents a pound for September delivery, pressed by the questionable fundamentals raised by a Barclays Capital note, and by technical weakness.

"Speculative appetite for more length currently seems to have faded," Ralph Hawes at Sucden Financial said.

Prices "could still be vulnerable to the downside, while a seasonal Industry slowdown is also not helpful to the bulls", he added.

In London, robusta beans for September  delivery ended 2.7% lower at $1,684 a tonne.