Chicago | Reuters — U.S. spring wheat futures jumped 4.6 per cent to their highest in 2-1/2 years on Tuesday, pulling soft red winter wheat and hard red winter contracts higher on growing worries about crop health in the dry U.S. Plains, traders said.
The rally stemmed from a U.S. Agriculture Department report released on Monday afternoon that showed crop conditions down from a week ago and well below market expectations.
“USDA cut its assessment of the spring wheat crop sharply for the second straight week, knocking more than three bushels per acre off yield potential according to our models,” Farm Futures senior analyst Bryce Knorr said in a note to clients. “That could trim 30 million bushels off the total wheat crop.”
MGEX July spring wheat futures ended up 27-1/2 cents at $6.28 a bushel (all figures US$). Prices peaked at $6.33-1/4 a bushel, the highest for the front-month contract since Jan. 6, 2015.
Chicago Board of Trade July soft red winter wheat futures closed up 11 cents at $4.45 a bushel and K.C. July hard red winter wheat was up 14-1/4 cents at $4.57 a bushel.
Weather concerns also sparked buying in corn and soybean futures, which firmed as forecasts for key Midwest growing areas predicted less rain than earlier outlooks.
CBOT July corn futures were 3-3/4 cents higher at $3.81 a bushel while CBOT July soybeans gained 1-1/4 cents to $9.32-1/2 a bushel.
Both corn and soybean futures closed well below session highs.
Traders noted some bargain buyers stepping in to the corn and soybean market, adding further support, following declines on Monday.
Monday’s crop condition report from the U.S. Department of Agriculture assessed the spring wheat crop at 45 per cent good-to-excellent as of June 4, down 10 percentage points from a week earlier. Analysts had been expecting a good-to-excellent rating of 53 per cent.
“When a weather risk is seen in one sector of the grains and soybean complex, investment funds tend to add risk premiums into other sectors regardless of whether increased risk is visible,” said Matt Ammermann, commodity risk manager at INTL FCStone. “If there are issues with spring wheat now you have to ask yourself whether there will be issues with soybeans and corn.”
U.S. soybeans were rated by the USDA at 66 per cent good-to-excellent, compared with forecasts for 69 per cent. U.S. corn was at 67 per cent good-to-excellent, matching analysts’ forecasts.
— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Naveen Thukral in Singapore.