Soybean futures rose two per cent on Wednesday on continued demand from exporters and domestic processors in the cash markets, even as the worst U.S. drought in half a century tightened supplies.
Corn rose nearly as much on spillover strength from soy and energy prices, and wheat also advanced, rebounding after a three-day slide.
Several domestic soy processing plants raised their cash basis bids for soybeans in the past day by 10 to 15 cents per bushel as farmer offerings slowed (all figures US$).
Profit margins for soybean processors have been strong due to near record-high prices for soymeal, creating an incentive for processors to buy and crush soybeans.
Demand for soymeal, a source of protein in animal feed, has climbed as feed mixers seek a replacement for a competing ingredient, dried distillers' grains (DDGs), a byproduct of ethanol production.
"(Soybean) crush margins are terrific. Meal demand is very strong, and part of that is because of less DDG availability, with ethanol plants reducing their grind. So the demand for protein has floated all those values," said Terry Linn, analyst with the Linn Group, a Chicago brokerage and research firm.
On the export side of the market, the cash premium for promptly shipped U.S. soybean barges at the U.S. Gulf Coast spiked as at least one exporter was short of needed soybeans amid very tight supplies in the marketing pipeline, traders said.
Traders noted unconfirmed talk that China, the world's top soybean buyer, was pricing U.S. soybeans.
At the Chicago Board of Trade (CBOT), benchmark November soybeans settled up 36-1/2 cents, or 2.3 per cent, at $16.34-1/2 per bushel.
"Crops are bad, carry-out is low, users are short and there's a huge amount of demand to ration," said Paul Haugens, vice president for Newedge USA. "And $7.50 corn or $16 beans isn't going to do the job. Prices have to go higher than this."
Eye on energy prices
Cash corn basis bids have been mixed with values firming in parts of the Midwest interior, while slow export demand has kept a lid on cash corn values at the U.S. Gulf.
Nonetheless, corn futures got a lift Wednesday from rising energy prices, with spot RBOB gasoline futures up 2.5 per cent. Corn is linked to energy markets through its use as a feedstock for ethanol.
"Gasoline demand has been pretty good and you've got RBOB up today, so that is certainly supportive to ethanol," said Jim Gerlach, president of A/C Trading in Fowler, Indiana.
CBOT December corn rose 15 cents, or 1.9 per cent, to $8.04 a bushel, but was still well below Friday's all-time high of $8.49.
Ethanol output has rebounded in recent weeks after soaring corn prices and poor profit margins forced some U.S. plants to temporarily shutter or slow operations.
U.S. government data released Wednesday showed ethanol production rose to 819,000 barrels per day for the week ended Aug. 10, the third straight weekly rise in output.
Russian wheat exports eyed
September wheat ended up seven cents, or 0.8 per cent, at $8.46-3/4 per bushel. Front-month CBOT wheat lost more than eight per cent in the previous three sessions, the biggest three-day loss since July 2011.
Dealers said the market remained underpinned by tightness in supplies of Russian wheat and the possibility that some kind of export controls may be imposed in the next few weeks.
Russia's exportable grain surplus of 10 million to 11 million tonnes could run out by November if the country retains a high pace of shipments in coming months, SovEcon agricultural analysts said, fanning fears about export limits.
-- Julie Ingwersen covers agricultural commodities markets for Reuters in Chicago. Additional reporting for Reuters by Sam Nelson in Chicago, Nigel Hunt in London, Naveen Thukral in Singapore and Sarah McFarlane in London.