Forexpros – U.S. grain futures ended the week higher on Friday, with soybean futures gaining on concerns over drought-stricken crops in Argentina and Brazil, while wheat and corn futures rose on the back of rising demand for U.S. supplies on the export market.

Agricultural commodities also received a lift Friday from a broadly weaker U.S. dollar, following the release of a report showing that U.S. new home sales fell for a second month in February.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, fell 0.54% to settle the week at 79.53, the lowest since March 9.

A weaker dollar boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.

On the Chicago Mercantile Exchange, soybeans for May delivery settled at USD13.6662 a bushel by close of trade Friday. On the week, prices dipped 0.75%, the first weekly decline in six weeks.

Earlier Friday, prices rose to USD13.6888 a bushel, the highest since March 19, when prices rallied to the highest since mid-September.

Argentina’s Agriculture Ministry said Friday that the country’s soybean production was expected to fall to 44 million metric tons in the current marketing season, down from 49 million harvested in 2011 and 46.5 million estimated by the U.S. Department of Agriculture earlier in March.

Earlier in the week, influential industry group Oil World cut its estimate for the soy crop in Brazil by 1.5 million tonnes to 66.5 million tonnes, down 12% from 75.3 million a year earlier.

Brazil and Argentina are major soy exporters and compete with the U.S. for business on the global market. Gloomy South American crop prospects could increase demand for U.S. supplies.

Last month, the USDA said that reduced South American production will boost U.S. exports by 22% to a record 42.2 million tons in the marketing year that begins in September.

Prices also drew support from market talk that China bought a cargo of U.S. soybeans on Thursday for April shipment from the Pacific Northwest.

China is the world’s largest soybean consumer and is expected to account for nearly 60% of global trade of the grain in the 2011-12 season, according to the USDA.

In February, U.S. farmers sold 2.923 million metric tons of the oilseed to China in the biggest one-day deal on record.

Soybean futures have rallied almost 13% since the beginning of February, including a gain of nearly 5% in March, as market sentiment has been dominated by concerns over distressed crops in major South American soy growers and on hopes demand from top consumer China will remain robust in the near-term.

Prices dropped to a seven-day low on Thursday, in the wake of dismal manufacturing data from China and the euro zone, which boosted the dollar and weighed on commodities and other risk-sensitive assets.

Meanwhile, corn futures for May delivery settled at USD6.4638 a bushel by close of trade on Friday. On the week, prices tumbled 4.2%, the largest weekly drop since early January.

Earlier Friday, prices rose to a three-day high of USD6.5175 a bushel after the USDA’s Export Sales report showed that corn exports totaled 917,100 tonnes last week, the largest in five weeks, compared to expectations for sales in the range of 650,000 to 850,000 tonnes.

Also providing support was news that Argentina’s Agriculture Ministry lowered its corn output forecast for the current marketing year to 21 million tonnes, down from 22.5 million tonnes harvested last season.

Expectations that China will import more corn from the U.S. in the current marketing year lent further support. China’s corn imports in February soared to 520,671 tonnes, up significantly from 1,035 tonnes in February last year.

The USDA said earlier in the month that China will import at least 2 million tonnes of corn this year. Last week, Standard Chartered said in a report that China was at “a tipping point” between its history of self-sufficiency in corn and a future of structural imports.

Prices came under heavy selling pressure earlier in the week. On Thursday, futures dropped to USD6.3625, the lowest since March 9 as traders speculated U.S. farmers planted the most acres of corn since 1944.

The USDA will release its updated grain acreage projections on March 30.

Corn futures rallied nearly 6% in February amid concerns over damaged corn crops in major South American growers and on speculation of robust demand from China.

But prices have lost almost 3.5% in March amid expectations for the most planted acres of corn by U.S. farmers this year since 1944.

Elsewhere on the Chicago Board of Trade, wheat for May delivery settled at USD6.5462 a bushel by close of trade on Friday. Prices slumped 2.9% on the week.

Earlier Friday, prices rose to a four-day high of USD6.7262 a bushel after the USDA reported weekly wheat export sales of 541,300 tonnes, above market expectations of 400,000 to 500,000 tonnes.

News that China bought 350,000 tonnes of feed wheat from Australia also provided support as it triggered speculation China will increase its reliance on global wheat imports.

Wheat traders are hopeful that demand for U.S. exports will increase because U.S. wheat remains the cheapest in the world.

Wheat futures came under heavy selling pressure earlier in the week, dropping to the lowest level since late February on Thursday amid favorable weather conditions in the U.S. Great Plains region, while some technical selling by large institutional investors also weighed.

Agricultural meteorologists continued to point to wet weather conditions across most parts of the U.S. Great Plains region, improving prospects for winter wheat crops that recently emerged from dormancy.

Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.

In the week ahead, grain traders will continue to monitor weather conditions in South America and the U.S.

Some market analysts were already eyeing the release of the USDA’s updated grain acreage projections on March 30. Markets are speculating that U.S. farmers increased planting of corn, some at the expense of soybeans.

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