U.S. grains: Wheat up on export demand, weather worries

U.S. wheat futures ended higher on Tuesday on growing export demand and a cold snap forecast for late this week that may harm some U.S. wheat, but gains were capped by increased production prospects in Australia.

Corn closed firm as well on short-covering and on spillover from the gains in wheat while soybeans were mixed with gains slowed by bright soy production prospects in South America.

Corn’s gains were curbed by news that China may reject U.S. corn cargoes that contain an unapproved GMO variety; additional overhead pressure on soy also stemmed from talk that a Chinese buyer may be set to reject U.S. soy cargoes as well.

Chicago Board of Trade December wheat closed four cents per bushel higher at $6.53-3/4, December corn was up 5-1/2 at $4.22 and January soybeans were down 1-1/2 at $13.19-3/4.

A cold snap late this week could pose a threat to portions of the U.S. hard red winter wheat crop, an agricultural meteorologist said on Tuesday.

“Forecast temperatures are not quite as cold as previously, but still about 5 percent of the crop is at risk of winterkill,” said Don Keeney, a meteorologist for MDA Weather Services.

Traders and analysts said the cold snap probably would not harm much of the crop and was not likely to be a major market mover.

“The Arctic blast is not a good thing since we’ll see some damage to hard red winter wheat, but we are going to see pretty good snowfall, which will help prevent a lot of harm,” said Sterling Smith, a futures specialist for Citigroup.

Improved demand for wheat was a key reason for the firmer tone in the wheat market.

Wheat demand cited

“The (wheat) market is very much focused on the demand side of the equation,” said Andrew Woodhouse, a grains analyst at Advance Trading Australasia.

Egypt’s main wheat-buying agency, the General Authority for Supply Commodities, on Tuesday bought 60,000 tonnes of Romanian wheat for late December shipment. It was the fifth international tender in less than a month.

Algeria and Tunisia also are tendering for wheat.

Dealers said improved crop prospects in major exporter Australia helped to limit gains.

The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) forecast wheat output of 26.213 million tonnes, up from its September estimate of 24.467 million.

Corn/soy market on alert

News that China may be set to reject cargoes of U.S. corn was dampening gains in CBOT corn futures.

China, one of the world’s largest corn importers, is likely to reject more U.S. shipments of the grain after they were found to contain a genetically modified variety not approved by Beijing, traders said.

“If China is not going to allow imports of beans or corn due to GMO, it will certainly have a chilling affect on demand,” Smith said.

“China sees the bearish pressure from the big corn supply, and this is giving them added incentive to find a reason to reject cargoes,” he said.

There are also rumors that a Chinese soybean buyer is asking to wash out of at least six cargoes of soybeans that were set to be delivered in January.

The Chinese concerns, combined with bright crop prospects in South America, slowed the gains in soybean futures.

“South American weather is very good. In Brazil it’s possible to see a 90-million-tonne crop, which will keep pressure on prices,” Smith said.

USDA’s latest forecast for Brazil’s soybean production for the 2013/14 marketing year is 88.0 million tonnes.

– Sam Nelson reports on grain and oilseed futures markets for Reuters from Chicago. Additional reporting for Reuters by Nigel Hunt in London.