U.S. grains: Soy, corn extend rally on supply concerns, wheat falls

Chicago | Reuters — U.S. soybean futures rose 1.4 per cent on Tuesday, with old-crop months hitting fresh contract highs on follow-through buying after a government report confirmed that the tight domestic supply situation is likely to persist until harvest.

“The U.S. Agriculture Department did nothing yesterday to dispel notions that U.S. old crop supplies are tight, requiring higher prices to discourage demand and encourage imports and early harvest of 2014 fields,” Farm Futures analyst Bryce Knorr said in a note to clients.

Corn futures also rose, gaining 1.3 per cent and hitting their highest since Aug. 27, due to the government’s forecast of smaller-than-expected plantings this spring.

Strong speculative buying added support to prices, with large investment funds jumping in after grains posted sharp gains during the first quarter of the year.

“It is the beginning of the month, the beginning of the quarter,” said Tom Grisafi, market adviser at Advance Trading. “The money flow wants the grains. They are going to buy it.”

Chicago Board of Trade May soybean futures closed up 20-1/2 cents at $14.84-1/2 after hitting a contract high of $14.91-1/2 hit earlier in the session (all figures US$).

“Beans rallied again as fresh money came in on the long side with the new calendar quarter starting,” said Charlie Sernatinger, analyst with ED+F Man Capital.

On a continuous basis, the front-month contract was trading at its highest since Sept. 13, 2013.

Investment bank Morgan Stanley said that despite the market’s initial bullish reaction, it does not expect the stocks estimate for soybeans to be able to sustain a rally in prices.

“With sales coverage in the South American crop far behind last year’s levels and Chinese demand waning, we see the setup into the second half of 2013/14 as quite different from the same time a year ago.”

CBOT May corn gained 5-1/2 cents, settling at $5.07-1/2. Prices peaked at $5.12-1/2 a bushel, the highest for the front-month contract on a continuous basis since hitting $5.19-1/4 on Aug. 27.

“I think there’s more bullishness for corn going forward on the back of both the stocks and plantings reports. I expect it to test the resistance level of $5.20,” said Vanessa Tan, an investment analyst at Phillip Futures.

Wheat futures fell as traders built up long corn/short wheat spreads. Chicago Board of Trade May soft red winter wheat closed 12 cents lower at $6.85-1/4 a bushel.

Wheat prices found support at the 20-day moving average, a key technical point the benchmark May contract has not closed below since Feb. 27.

USDA said late on Monday afternoon that the condition of the crop in the southwestern Plains stabilized despite drought across much of the region. Ratings for the crop in Kansas, the largest production state for the grain, fell for the third week in a row.

— Mark Weinraub is a Reuters correspondent covering grain futures markets from Chicago. Additional reporting for Reuters by Manolo Serapio Jr. in Singapore, Michael Hogan in Hamburg and Nigel Hunt in London.

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