U.S. grains: Wheat up two per cent on weather, Ukraine concerns

Chicago | Reuters — U.S. wheat futures rose two per cent on Friday, extending a rally on worries about dry weather limiting crop production in the U.S. Plains and ongoing fears that supplies from Ukraine will be disrupted due to political turmoil, traders said.

The strength in wheat lent support to corn prices, but soybeans closed slower due to sagging demand from China.

“You still have some people starting to get a little more concerned about the U.S. hard red winter wheat crop as it comes out of dormancy,” said Mike Krueger, president of The MoneyFarm, a grain market advisory service. “There is not much rain in the forecast and it has been dry.”

Wheat prices also remained technically strong after pushing through key resistance points during the past few weeks.

Chicago Board of Trade soft red winter wheat for May delivery settled up 13-1/2 cents at $6.87-1/4 a bushel (all figures US$).

The front-month CBOT wheat contract gained 6.8 per cent this week. During the past two weeks, wheat futures have risen 15.2 per cent, their biggest two-week rally since July 2012.

“It’s a combination of Ukraine/Russia, and a reduced precipitation forecast for the southern Plains, with no additional rains, beyond this weekend, for a few weeks. So — ongoing problems there,” said Dan Cekander, grains analyst with Newedge USA.

The political crisis in Ukraine threatens to curb supplies from one of the world’s leading exporters of wheat and corn.

Port activity has continued normally and farmers have started spring sowing, but talk that traders are holding back from fresh export deals and that farmers are struggling to finance crop sowing has made grain markets nervous.

Investors are awaiting the outcome of a referendum on Sunday in Crimea, in which the southern Ukrainian region could vote to join Russia and prompt Western sanctions against Russia.

CBOT May soybeans were down 7-3/4 cents at $13.88-1/2 a bushel. Front-month soybeans shed 5.6 per cent this week, the biggest weekly loss on a continuous basis in nearly six months.

“We have probably seen the peak in soybean prices,” said Paul Deane, agricultural commodity strategist at ANZ in Melbourne. “I don’t see how prices can sustain at these levels.”

The ongoing harvest of a large soybean crop in Brazil is pushing supplies higher even as demand from China, the top buyer of soybeans, is weakening. The combination has hurt both the cash as well as the futures market in the U.S. and South America.

“The fear of further Chinese cancellations will likely temper any upside ideas for their basis and/or our futures,” Sterling Smith, Citigroup market strategist, said in a note to clients. “Feed demand across all sectors of the country (China) is weak, as bird flu is seen cutting into demand for poultry.”

CBOT May corn was one cent higher at $4.86 a bushel. The front-month contract posted a 1.8 percent drop for the week.

China is likely to stockpile 60 million tonnes of corn by the end of April, the China National Grain and Oils Information Centre (CNGOIC) said in a report on Friday.

The levels were higher than earlier expected as outbreaks of bird flu hurt domestic demand for feed grain, prompting farmers to sell more to the government.

— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Julie Ingwersen.

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