Soybean and corn prices rose to their highest levels in 10 days on Monday amid the worst drought in half a century, with traders set to get fresh evidence of the extent of damage from the Midwest farm belt.
Wheat futures at the Chicago Board of Trade, which gave up early gains to head slightly lower in a mild pullback, rebounded with corn and soybeans.
Analysts were expecting the condition of the US soybean crop to have improved for a second straight week following rains in the Midwest farm belt, where the drought is centered.
“The trade is expecting soybean condition ratings to be steady to better,” said grains analyst Karl Setzer of MaxYield Cooperative in West Bend, Iowa.
Although corn prices have retreated 4 percent from the record high of $8.49 set on Aug 10, they have gained 55 percent since June 1. Similarly, although spot soybeans have fallen about six percent from the all-time high of $17.77-3/4 per bushel set on July 20, they are still up 25 percent from June 1.
The rallies in the world's largest grain exporter have sent ripples of concern over food prices across the world, with prices for corn and soybeans exceeding those during the 2008 food crisis when riots broke out in several countries.
Chicago Board of Trade new-crop December corn rose 1.1 percent to $8.16-1/4 a bushel by 16:54 SA time, the highest since Aug. 10. November soybeans rose 1.2 percent to $16.65, the highest since Aug 10. September wheat rose 0.2 percent to $8.76-1/4 per bushel.
Traders will be getting fresh evidence of crop damage from the fields as the Pro Farmer annual crop tour kicked off on Monday. Fund managers, crop forecasters and analysts will inspect corn and soybean fields and determine yields.
With many analysts already expecting yields for both crops to be below the current estimates from the US Department of Agriculture, yield projections from the tour would have to be dramatic to move the grain markets in Chicago.
“The floor already knows the crops are pretty bad,” a grains trader said.
EYES ON RUSSIA, AUSTRALIA
Wheat futures were underpinned by continued speculation that Russia could curb its exports due to a poor crop.
Russia's two main grain market analyst groups cut their 2012 grain and wheat harvest forecasts on Monday after the start of harvesting campaigns in Urals and Siberia regions showed weak crop prospects.
“The issues out of Russia are certainly significant for the wheat market as at the current pace of exports they are likely to exhaust their surplus by around Christmas time,” said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia.
Russian Agriculture Minister Nikolai Fyodorov on Friday ruled out a grain export ban but did not exclude “pinpoint interventions” to influence exports.
“Australia is also providing some added risk premium to grain markets as El Nino there threatens to cause draught related causes,” FCStone said in its daily note.
Any effort by drought-stricken Russia to restrict grain exports is likely to provoke a similar move by neighboring Ukraine, leaving markets bereft of supply from two major Black Sea producers at a time when dry weather has slashed grain supply from India to Indiana.
In 2010, Russia banned exports after a severe drought devastated its wheat crop, boosting Chicago wheat futures about 80 percent that summer to peak at $8.41 per bushel. - Reuters