U.S. grains: Weather fears, short-covering lift prices

(Stephen Ausmus photo courtesy ARS/USDA)

Chicago | Reuters — U.S. grain futures edged higher Tuesday on concerns that unfavourable crop weather could threaten domestic production, as markets temporarily shook off the weight of massive global inventories.

Technical buying and short covering ahead of a monthly U.S. Department of Agriculture report on Wednesday helped fuel the gains, traders said.

Wheat traders were watching weather forecasts as above-normal temperatures in recent weeks have brought the crop grown in the Great Plains out of dormancy earlier than normal, leaving plants vulnerable to damage if a late-spring freeze hits the region.

Some corn and soybean traders also were worrying about the weather, even though most farmers will not begin planting the crops for weeks.

“Corn bulls are keeping an eye on U.S. weather as many inside the trade start to worry about pockets of dry conditions in the southwest Plains and problems with too much rainfall and flooding in parts of the Delta,” said Kevin Van Trump, president of Missouri-based consultancy Farm Direction.

The Chicago Board of Trade’s most-actively traded May corn contract ended up 1-1/2 cents at $3.60-1/2 a bushel (all figures US$) after reaching its highest price since Feb. 25.

Most-active May wheat rose 2-1/2 cents to $4.65-1/4 a bushel, while May soybeans edged up 2-3/4 cents to $8.84-1/2 a bushel. On Monday, the May contracts reached their highest levels since Feb. 22 after U.S. data showed investors had built up short positions.

The weather-fueled gains will likely be short-lived, with a return to $4 a bushel in corn looking “like a million miles away,” Van Trump said. Corn prices have dropped by half in the past three years as large harvests have built up supplies.

On Wednesday, traders expect USDA to further increase its estimates for global corn and soybean inventories from February.

Yet, concerns about massive supplies may already be factored in to the markets, said Rich Nelson, chief strategist for Illinois-based brokerage Allendale.

“In general a lot of people questioning whether we need to be down at these prices,” Nelson said.

USDA on Tuesday said private exporters struck deals to sell 110,000 tonnes of U.S. soybeans to top importer China for delivery during 2016-17 marketing year, which began on Sept. 1. Exporters also reported sales of 140,000 tonnes of U.S. soybeans for delivery to unknown destinations.

Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Colin Packham in Sydney.

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