U.S. grains: Wheat soars to 10-month high on crop worries

Chicago | Reuters — U.S. wheat futures climbed to a 10-month high on Wednesday on concerns dust storms and dry conditions will hurt harvests in the southern Plains states.

Soybean futures hit an eight-session high on projections that strong domestic and export demand could prevent inventories from recovering from last year’s drought-depleted levels.

A lack of rain in the U.S. Plains and dust storms in Texas threaten to reduce production of hard red winter wheat, which is used to make bread, said Rich Nelson, chief strategist for Allendale.

The crop, which was planted in the autumn, is starting to grow again after going dormant during the winter. It will be harvested in late spring and early summer.

“It’s sure dry in the Plains,” Nelson said. “The mid-term forecast still shows no relief.”

May wheat soared 23-1/4 cents to $7.15-3/4 a bushel at the Chicago Board of Trade (all figures US$). May corn edged up 1-1/2 cents to $4.87-3/4, while May soybeans gained 13 cents to $14.31-1/4.

Commodity Weather Group said there was very little potential for showers in the southwestern areas of the Plains wheat belt during the next two weeks.

Dry conditions have already taken a toll. In Kansas, 34 per cent of the wheat crop was rated in good to excellent condition as of Monday, down from 37 per cent a week earlier.

Nelson projected the market will extend gains as discussions ramp up about how many acres farmers will abandon due to poor conditions.

Funds that have bought back short positions, or bets that prices will fall, have helped propel recent advances.

“Funds have covered their short positions and additional buying will have to come from funds wanting to build a long position,” said Brian Hoops, president of Midwest Market Solutions.

Commodity funds bought a net 11,000 Chicago Board of Trade wheat contracts and 6,000 soybean contracts, traders said.

Focus on soy supply

Supply concerns were in focus for soybeans as favourable crush margins have prompted processors to bid aggressively for the oilseed. Traders said up to five cargoes of Brazilian soybeans could be headed to the U.S. because they were more affordable than U.S. supplies.

Strong demand has pinched soybean users who had hoped the large U.S. harvest in 2013 would help to replenish supplies that had been drained by poor weather in previous years.

There is not a “solution in sight to solve” tightness in the U.S. supply and demand balance sheet, other than larger imports, reduced domestic crushing or an upward adjustment in the size of the last harvest, said Rich Feltes, vice-president of research for RJ O’Brien.

Signs are “mounting that soy rationing must occur with domestic crush,” he said.

Imports of soybeans into the United States from Brazil would be bearish because they would increase the availability of supplies, said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.

However, the fact that imports work economically “is being taken by the bulls as another sign of just how tight the U.S. situation really is,” he said.

— Tom Polansek reports on agriculture and ag markets for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.

 

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