U.S. soybeans fell over one per cent to a six-week low on Friday, the fourth consecutive daily drop, on prospects the U.S. government may increase its forecast size of the U.S. crop, a likely bumper harvest of South American soy and China's cancellation of orders for U.S. soybeans.
"A lot of this has to do with the good outlook for the South American crop. Brazil's crop weather has been good and now Argentina is improving. Argentina is catching up after a period of wet weather," said Anne Frick, oilseeds analyst for Jefferies Bache.
South America is the largest soybean producing region in the world, followed by the United States.
Frick also said soybeans were still labouring under the weight of the U.S. Department of Agriculture's (USDA) announcement on Thursday that China, the world's largest soy importer, had canceled orders for 315,000 tonnes of U.S. soybeans.
USDA gave no reason for the cancellations, which follow China's scrapping of purchases totalling 840,000 tonnes in the week of Dec. 16. Another 120,000 tonnes cancelled that week were believed by traders to have been by Chinese importers.
"China cancellations are having a negative impact. Also, I think some, including me, are expecting USDA to raise U.S. soybean production in next week's report," Frick said.
USDA is to release its final crop production report for the 2012 U.S. soybean and corn harvest next Friday, Jan. 11.
"They increased bean production 3.8 per cent in November and historically that often means another increase in the January report," Frick said.
Initial analysts' estimates compiled by Reuters show they expect a slight increase in U.S. soybean output in Friday's report.
Analytical firm Informa Economics on Friday estimated 2012 U.S. soybean production at 3.04 billion bushels, up from its previous outlook for 2.971 billion, and raised its estimate for corn output to 10.8 billion from its previous outlook for 10.725 billion.
"Informa bumped up their numbers for corn and bean production and South American weather looks good, beans are leading the way down," said Brady Beyer, analyst for CHS Hedging in Minnesota.
Wheat and corn remained under pressure, trading at six-month lows amid a broad-based weakness in commodities and stronger dollar which makes U.S. grains less competitive on exporting markets.
Corn fell for the fifth consecutive week for the first time in 15 months and the front-month wheat contract was down for the sixth straight week, the longest losing streak since October 2011.
Chicago Board Of Trade (CBOT) March soybeans were down 19-1/4 cents per bushel at $13.67-1/4, March wheat was down 8-1/4 at $7.47-1/4 and March corn eased nine cents at $6.80-1/4 (all figures US$).
Soy ended the week down 2.4 per cent, corn down two per cent and wheat down four per cent.
Technical selling weighed on all three markets. But declines were slowed by their relative strength indexes, each of which had slipped into levels suggesting the markets are oversold.
March corn fell below key technical support at its 200-day moving average of $6.84 per bushel, to a session low of $6.79-1/2.
"March corn filled the gap around $6.83 and the next one is in the mid-70s," Beyer said.
New-crop December 2013 corn, which fell below $6 per bushel last week, is at its lowest level since early July.
"The weather conditions are favorable in South America. The USDA report to be published on Jan. 11 could confirm the estimates for record soybean crops in Argentina and Brazil," analysts at France's Agritel said in a daily note.
"Latest cancellations bring back the fears about a slowdown of the Asian demand."
Tepid exports of U.S. wheat, corn and soybeans also discouraged active buying of futures, allowing each market to flounder at lower levels.
"Exports weren't very good, in fact horrible for corn at 49,000, there just wasn't anything supportive today," said Beyer.
USDA's weekly export sales report on Friday showed net U.S. corn and wheat sales last week were the lightest in four weeks. Corn was below trade guesses and wheat was within the range of estimates, while net soybean sales were just above trade forecasts and a two-week high.
-- Sam Nelson covers the CBOT grain and soy futures markets for Reuters in Chicago. Additional reporting for Reuters by Julie Ingwersen, Karl Plume and Mark Weinraub in Chicago, Ivana Sekularac in Amsterdam and Naveen Thukral in Singapore.