U.S. grains: Wheat surges on dry weather concerns, Ukraine tension

Chicago | Reuters –– U.S. wheat futures jumped nearly two per cent on Thursday on concerns about dry conditions in the U.S. Plains winter wheat belt and some key production areas of Western Europe as well as worries about tensions in eastern Ukraine.

Soybeans bounced back on bargain-buying after shedding more than three per cent this week, but uncertainty over demand from top importer China capped gains. Employees of a trading unit of Marubeni Corp. in China have been detained over allegations of tax evasion on soybean imports.

Corn futures drifted lower on profit-taking and technical selling following a sharp rally earlier in the week. Declines were limited by concerns that rainy weather might stall already-delayed spring planting.

Expected rain in the U.S. Plains fueled a drop in wheat prices on Monday, but traders said showers this week have missed some very dry regions in the southern Plains.

“I don’t think that the wheat market is convinced that the rains in Texas and Oklahoma are doing the job, and we’re getting worries about dryness creeping into Western Europe, particularly France,” said Sterling Smith, an analyst at Citigroup, citing the European Union’s top grain producer.

Tensions in Ukraine on Thursday also showed the continued risk of disruption in the Black Sea grain export zone.

Ukrainian forces killed up to five pro-Moscow separatists in the east of the country, the Interior Ministry said, as Russian President Vladimir Putin warned of “consequences” if Kiev used the army against its own people.

“That’s keeping the speculative shorts very quiet and might even turn a few of them into buyers,” Smith said.

A Statistics Canada survey released on Thursday showed Canadian farmers would cut wheat plantings this spring as a backlog in railway shipments left ample supplies of most crops from last year’s harvest. [Related story]

Chicago Board of Trade May soft red winter wheat jumped 12-1/2 cents, or 1.9 per cent, to a one-week high of $6.89 per bushel (all figures US$). Buying accelerated as the contract breached technical resistance around its 20-day moving average of about $6.81. It was the contract’s steepest gain in 1-1/2 weeks.

The May hard red winter wheat contract added 13-3/4 cents, or 1.8 per cent, to $7.59-1/2 per bushel.

CBOT May soybeans gained 3-1/2 cents to $14.72 per bushel. The contract hit a 1-1/2-week low, but rebounded to close higher for the first time in five sessions.

Three employees at one of Marubeni’s grain trading units in China have been detained, Chinese customs officials said, a move prompted by allegations of tax evasion on soybean imports. The detentions could add to recent pressure on soybean prices after a wave of soybean cargo defaults in China.

The soybean market has been dampened by talk that tight U.S. supplies may be boosted by imports into the United States in a knock-on effect from lower demand from China.

CBOT May corn futures fell 2-1/4 cents, or 0.5 per cent, to $5.01-1/4 a bushel after adding three per cent in the previous two sessions.

Cold weather and rain have hampered the start of the spring planting season for corn, and forecasts for more showers since Wednesday could continue to slow progress.

— Karl Plume reports on agriculture and commodities for Reuters from Chicago. Additional reporting for Reuters by Valerie Parent and Gus Trompiz in Paris and Colin Packham in Sydney.

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