There was caution around at the end of the last session that the revival in crop prices could not last, with high prices likely to attract US farmer selling off the combine, and with some funds in a nervy mood.

And crops on Thursday indeed opened softer, if only thanks in fact to renewed risk-off mood on financial markets. Data from China, a major consumer of raw materials, showed manufacturing activity, while improving a touch, remaining weak.

A purchasing managers' index compiled by HSBC came in at 47.8, a rise of 0.2% from the August figure but well below the level of 50 above which indicates expansion.

It certainly did little to cheer financial markets. Shanghai shares tumbled 2% to its lowest level since February 2009, with stocks weak on other Asian markets too, falling 1.6% in Tokyo.

And, in further evidence of the downbeat sentiment, the safe haven of the dollar jumped 0.6%, adding further pressure to prices of dollar-denominated exports, such as many commodities, making them less affordable to buyers in other currencies.

Ethanol uptick

Against that background, it was little surprise that agricultural commodities traded lower, especially given concerns that the rise in the last session might not be sustainable, at least while row crop harvests are swelling silos' inventories.

In corn, there are lingering concerns over demand too, despite upbeat ethanol production data on Wednesday indicating that on this score, at least, demand may beat US Department of Agriculture forecasts.

The latest weekly output "represents a yearly corn use number of 4.625bn bushels", Darrell Holaday at Country Futures noted, ahead of the USDA forecast of 4.5bn bushels.

Exports have sagged, although more known later when the USDA unveils US weekly export sales data expected to come in at 300,000-400,000 tonnes.

Indeed, Brazil has been putting in competitive offers – taken up even by some US corn users.

'We don't think corn can hold rallies'

And while more on feed use of the grain will be revealed with grain stocks data next week, there is some evidence of corn rationing kicking in here too, with huge liquidation of hog herds – if not so much of sows.

At RJ O'Brien, Richard Feltes said: "Corn has already lost export demand and some domestic feed off-take as well with south east US poultry interests importing South American corn, feeding of broilers to lighter weights."

Sure the broker was hearing "some credible talk that final corn yield could slip closer to 115 bushels per acre", from the current official estimate of 122.8 bushels per acre.

However, until the USDA's October Wasde report, which will give a better-researched idea of the corn yield "we don't think corn can hold rallies without a pick-up in export demand, which appears unlikely short term given the steep discounts offered by South America".

Extra sowings? 

As a further uncertainty for the market, Informa Economics will later unveil acreage estimates in which they will adjust for the latest data from the Farm Service Agency, which handles farm support programmes.

FSA figures, gleaned from farm returns, and which were raised by more than 800,000 acres for both crops earlier this week, appear to indicate that sowings of corn and soybeans were higher than USDA data suggest.

"This could be an additional 900,000 soybean acres and 500,000 corn acres," US Commodities said, adding that the USDA's figures faced adjustment in the October Wasde.

And there is a case for even higher upward adjustments, when comparing this year's FSA and USDA data with last year's.

Data later

Corn for December dropped 0.9% to \$7.49 ¾ a bushel in Chicago as of 09:10 UK time (03:10 Chicago time), with soybeans themselves not far behind, shedding 0.7% to \$16.57 ½ a bushel for the benchmark November contract.

On the export front, soybeans' own export sales data later are expected to show them picking up 600,000-800,000 tonnes, from 628,000 tonnes last time.

That said, the market will be keen for confirmation of the talk of Chinese purchases of US soybeans on the break in prices this week.

And as an extra headwind for the oilseed, Benson Quinn Commodities noted that "one seasonal trade says to sell November beans this week and buy back the first week of October".

Waning advantage

Wheat showed the most resilience to the market jitters, dropping a more modest 0.5% to \$8.77 ¼ a bushel for Chicago's December lot.

But then, an Iraq tender result on Wednesday, while going to Russia, appears to have offered further evidence of the growing erosion of the country's competitive price advantage, leaving it to rely on freight charge advantage for victory, as in an Egyptian tender last week.

Indeed, the Russian prices, including freight, "are only just below US and Australian offers, supporting the idea that tight domestic supplies will soon force Russia out of the export market", Luke Mathews at Commonwealth Bank of Australia said.

Sugar sweetens

For gains, it was necessary to turn to New York, where raw sugar, staged an attempt to put distance between itself and two-year lows it approached in the last session, adding 0.4% to 19.03 cents a pound.

"Sound production prospects in key exporting countries including Brazil, Australia and Thailand, combined with expectations of another Indian surplus," are weighing on prices, Mr Mathews said.

"Reports that Nigeria, the world's fourth largest sugar importer, plans to become self sufficient in sugar production within 10 years added to the bearish tone."

Still, Datagro on Thursday offered some support by raising its estimate for the important Brazil Centre South cane harvest, but cutting its estimate for sugar output nonetheless, citing lower concentrations of the sweetener.

Palm slips

In Kuala Lumpur, palm oil for December dropped 0.8% to 2,836 ringgit a tonne. A close at this level would be the lowest since October last year, and within sight of a two-year low.

Sentiment remains cautious after palm oil futures lost as much as 5.3% on Tuesday on reports that the US Midwest soybean crop was not as badly damaged by drought as initially feared, and that the harvest was progressing fast," Ker Chung Yang at Phillip Futures said.

With China a major palm oil importer, prices are also vulnerable to news on the Chinese economy.