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GRAINS-Decline on tepid export sales; demand concerns

Sam Nelson
Thursday, 25 Oct 2012 | 3:23 PM ET

* Tepid exports lead to concerns about demand destruction

* November options expiration Friday skews trade

* Support fades from Ukraine export ban announcement

* Signs of waning U.S. meat production

* South American weather eyed

(Updates prices, adds details of USDA export report, new analyst quotes, changes dateline from PARIS/SINGAPORE) CHICAGO, Oct 25 (Reuters) - U.S. soybean futures fell on Thursday, reversing three days of gains, while corn dropped nearly 1 percent on tepid U.S. export sales in choppy consolidation trade amid increasing concerns about waning demand. Wheat was down 0.5 percent, erasing earlier gains due to a lack of buying interest following Wednesday's nearly 2 percent price rally in response to news Ukraine would ban wheat exports from Nov. 15. The worst drought in half a century drove prices to historic highs this summer and now there were signs demand was waning as end-users back away from the market due to poor profits. At 9:43 a.m. CDT (1443 GMT), Chicago Board of Trade (CBOT) November soybean futures were down 7 cents per bushel at $15.63-1/2 per bushel, December corn was down 6-1/2 at $7.48 and December wheat was down 4-3/4 at $8.79-1/4. The U.S. Department of Agriculture's (USDA) weekly export sales report released at 7:30 a.m. CDT was disappointing for corn and soybean bulls but encouraging for wheat bulls. ``Everything did turn down right after the numbers were released. Wheat sales were above expectations, which is kind of surprising since we're supposed to be priced out of the market in many cases,'' said Roy Huckabay, analyst for the Linn Group. USDA in its weekly export sales report said net export sales of U.S. wheat last week totaled nearly 572 million tonnes, above estimates for 350,000 to 450,000. Corn sales were at 142,400 tonnes, below estimates for 150,000 to 250,000. Soybean sales also were lower than expected at 522,200 below estimates for 650,000 to 850,000 tonnes.

Huckabay also said that cancellation of corn purchases by China lent pressure to the market. USDA said China canceled two cargoes of corn last week and 173,000 tonnes of soybeans previously earmarked for China were switched to Taiwan and Thailand. USDA last Thursday also reported a decrease of corn sold to China. Position-squaring was noted ahead of the expiration of November options on Friday. ``November options expire tomorrow and the target for soybeans is the $15.50 area and corn at $7.50. In soybeans, we had gotten a little over extended up to the $15.74 area,'' said Sterling Smith, futures specialist for Citigroup. Smith also said the number of eggs placed in incubators for potential broiler production fell last week to the lowest since 2001, a bearish market factor for soymeal and soybean futures. USDA's broiler hatchery report released on Wednesday showed 177 million eggs in incubators during the week ended Oct. 20, down 4 percent from the eggs set the corresponding week a year earlier. Broiler producers use extensive amounts of soymeal in their high protein chicken feed. ``If we're going higher, I think soymeal and soybeans have to lead the way and without that leadership it might be difficult to rally,'' Smith said. USDA last week released a cattle report that showed the number of young cattle placed in feedlots for future slaughter at a level below expectations, down almost 20 percent from a year ago and the smallest September placements since records began being kept in 1996.

WHEAT SETTLES DOWN AFTER UKRAINE EUPHORIA Wheat futures on both sides of the Atlantic rose sharply in the previous session after Ukraine's agriculture minister said the country would ban wheat exports from Nov. 15, confirming reports from traders last week. The announcement reinforced the prospect of declining exports from drought-affected producers in the Black Sea region, putting the onus on European Union and U.S. wheat to meet more of importers' demand in the rest of the season. But with a drying up of exports from Ukraine and neighboring Russia well anticipated, and uncertainty over the actual terms of the Ukrainian embargo, operators said Wednesday's news was not enough to sustain a rally. ``It was more of a pretext to buy,'' a European trader said of Wednesday's market reaction to Ukraine's announcement. ``The impact of this (ban) was relatively well priced in. The U.S. market had a decent technical bounce.'' In Europe, benchmark January milling wheat was up 0.28 percent or up 0.75 euro per tonne at 267.25 euros per tonne. It briefly rose to 268.00 euros in opening trade to set a three-month high for the contract but then eased in the face of a longstanding ceiling at 270 euros. Prices at 9:50 a.m. CDT (1450 GMT)

LAST NET PCT YTD CHG CHG CHG CBOT corn 749.00 -5.25 -0.7% 15.9% CBOT soy 1564.00 -6.50 -0.4% 30.5% CBOT meal 481.00 -0.90 -0.2% 55.5% CBOT soyoil 51.55 -0.29 -0.6% -1.0% CBOT wheat 881.50 -2.50 -0.3% 35.0% CBOT rice 1498.00 -7.50 -0.5% 2.6% EU wheat 264.00 -2.75 -1.0% 30.4%

US crude 85.69 -0.04 -0.1% -13.3% Dow Jones 13,107 30 0.2% 7.3% Gold 1714.90 12.97 0.8% 9.7% Euro/dollar 1.2955 -0.0016 -0.1% 0.1% Dollar Index 79.9980 0.0840 0.1% -0.2% Baltic Freight 1051 -37 -3.4% -39.5%

(Additional reporting by KT Arasu and Karl Plume in Chicago, Gus Trompiz in Paris and Naveen Thukral in Singapore)