Did April Fool's Day come a couple of months early? The buying spree which drew prices out of their bear run earlier in the week came to a sharp halt on Wednesday.

What has become normal service resumed in crop markets. And this despite some residual strength in oil, which was credited with helping the last session's sharp recovery.

Granted, the dollar returned to the upward path on Wednesday, making US exports such as crops less competitive, but only by 0.3% or so.

Not enough, anyway, to cause the losses of 1.7% in soybeans and more than 3% in corn and wheat heading into late trade in Chicago, leaving all three in with a shout of more than wiping out the gains of the last session to end at three-month lows.

European crops were on the backfoot too, with Paris wheat corn March closing down E0.75 at E125.25 a tonne and all but the very near London contracts losing ground.

"Having staged a mini-recovery over the past 24 hours, wheat has once again slid lower," Hugh Schryver, at Glencore's UK grain arm, said, blaming "stronger sterling, lower shares, coupled with good first hand farmer selling".

'Rally lacked fundamental basis'

In Chicago, the fresh declines were blamed largely on the end of a halo effect, from the squaring off of accounts and new fund money, which provided some protection around the turn of the month.

"The first of the month fund buying dried up and the dollar rebounded from some short sell off this week and the result is a sharply lower grain and soybean complex," Darrell Holaday at Country Futures said.

"Much of the recovery since last Friday was tied to short-covering and fund buying.

"The rally lacked fundamental basis. If you don't get some fundamental demand - not funds - then you cannot sustain strength in the grains."

Informa revisions 

But there were some bearish changes to the fundamental, that is supply and demand, picture too.

Both were significantly higher than US Department of Agriculture estimates, as were Informa estimates for corn – raised 600,000 tonnes to 53.3m tonnes for Brazil, and by a whopping 2.7m tonnes to 18.2m tonnes for Argentina.

"These Informa estimates contributed to the growing losses in all the grains," Vic Lespinasse, analyst at GrainAnalyst.com, said during afternoon trade.

"A growing number of yesterday's buyers are now switching back to the short side, selling out yesterday's buys, helping drive prices to new lows for the session."

Lack of credit 

The end-of-2009  lapse of US tax credits for biodiesel – for which soyoil is the main feedstock – has also reared its head again.

"Until Congress renews the $1 a gallon subsidy for biodiesel fuel, little increase in demand for bean oil to make biodiesel fuel is expected," Mr Lespinasse said.

Mr Holaday added: "The lack soyoil diesel blending tax credit continues to weight on the soybean market as it simply will not work without the credit."

Little wonder, then, that soybeans for March were 1.7% lower at $9.10 a bushel heading into the last 20 minutes of trade.

March corn was 3.0% down at $3.54 a bushel, with wheat tumbling 3.3% at $4.71 a bushel.