U.S. grains: Weather concerns spark soybean rally

(Scott Bauer photo courtesy ARS/USDA)

Chicago | Reuters — Chicago Board of Trade soybean futures jumped 3.4 per cent to their highest in nearly two years on Wednesday as forecasts for hot temperatures to hit key growing U.S. regions stoked fears of damage to nascent crops, traders said.

“The weather is mostly dry this week, but now meteorologists are wrestling over how much rain we will see the middle of next week over the Midwest, and it is game on for our first mini-weather issue,” Charlie Sernatinger, global head of grain futures at ED+F Man Capital said in a note to clients.

Wheat futures also rallied on a short-covering bounce as traders scrambled to unwind bearish bets as prices have rallied 11.4 per cent during the last six sessions. Corn, which also has notched a six session winning streak, closed in positive territory on the back of the gains in soy as well as weather concerns.

Soybean futures peaked at their highest since July 1, 2014, receiving additional strength from another sale of U.S. supplies to China. The U.S. Department of Agriculture (USDA) has announced spot soybean sales for three days in a row, highlighting the problems that excessive rains have wreaked on the harvest in Argentina.

“While weather is starting to be the big dog in the market, demand news is still in play due to uncertainty over the size of the crop in Argentina,” said Bryce Knorr, senior grain market analyst at Farm Futures.

Corn, which hit its highest since July 17, 2015, but closed well off its session peak also stood to benefit from increased export demand.

CBOT July soybean futures rose 36-1/2 cents to $11.77-3/4 a bushel (all figures US$). CBOT July corn ended 3-1/2 cents higher at $4.31-1/4 a bushel.

“The real story in the near term is the heat,” said Tregg Cronin, market analyst for Halo Commodities in South Dakota. “If this pattern holds, it will become a major issue by mid-June.”

CBOT July soft red winter wheat futures were 10-1/2 cents higher at $5.19-1/2 a bushel. Prices for the most active contract peaked at their highest since Nov. 6.

USDA said early on Wednesday that exporters booked deals to ship another 132,000 tonnes of soybeans to China during the 2015-16 crop year, the top buyer of the oilseed.

“This is supportive today as it shows robust Chinese soybean import demand is continuing despite concern about China’s economic slowdown,” said Frank Rijkers, agrifood economist at ABN AMRO Bank.

Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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