Forexpros – U.S. grain futures rallied during European morning hours on Monday, with corn prices rallying 4% amid concerns over lower yield prospects in the U.S. Midwest.
Meanwhile, soybean and wheat prices jumped to multi-week highs on the back of concerns over crop conditions across major grain-growing regions around the world.
Agricultural commodities shrugged off a stronger U.S. dollar and broader market risk aversion, as fears over a slowdown in global growth and worries over the ongoing sovereign debt crisis in the euro zone weighed on appetite for riskier assets.
Instead, grain traders focused on market fundamentals, such as weather. Agricultural traders pay close attention to the weather because farmers need favorable conditions to grow large crops to replenish low inventories.
On the Chicago Mercantile Exchange, corn futures for July delivery traded at USD6.1025 a bushel, climbing 3.25%. Prices touched a one-month high of USD6.1688 a bushel on June 20.
The September corn contract traded at USD5.7425 a bushel, surging 4.15%.
Corn prices have been well-supported in recent sessions amid concerns dry soil in the U.S. corn-belt could strain the development of crops in the region, just as it enters its key pollination phase in the next few weeks.
U.S.-based industry group Cropcast cut its forecast for the 2012 U.S. corn yield to 158.6 bushels per acre last week, from its previous estimate of 163.7.
The next few weeks will be important for the grain, as the crop could face bigger losses if more rain doesn’t come during its pollination phase.
The U.S. produced 38% of the world’s corn last year, making it the both world’s largest corn producing nation and the largest exporter of the grain.
Elsewhere, wheat for July delivery traded at USD6.9625 a bushel, jumping 3.15%. It earlier rose by as much as 3.5% to trade at USD6.9675 a bushel, the highest since May 22.
The September wheat contract traded at USD7.1275 a bushel, rallying 3.65%.
Wheat prices have rallied sharply in recent sessions amid speculation the U.S. Department of Agriculture will cut its forecast of 2012-13 world wheat production in its next monthly report in July, following downgraded outlooks for crops in several key exporting countries.
Concerns over a disruption to supplies from the Black Sea-region intensified this week after influential Russian industry group SovEcon cut its forecast for Russia’s wheat harvest to 50.0 million tonnes, down 3.0 million tonnes from a previous estimate, citing damage from dry weather.
Meanwhile, in Argentina, the government forecast wheat sowings at 3.82 million hectares, the lowest in decades.
Russia and Argentina are major wheat exporters and compete with the U.S. for business on the global market. A downbeat crop outlook in those countries could boost demand for U.S. supplies, which is the world’s third largest wheat producer and biggest exporter.
Meanwhile, soybeans futures for July delivery traded at USD14.7850 a bushel, gaining 2.5%. It earlier rose by as much as 2.65% to trade at USD14.7950 a bushel, the highest since May 3.
The August soy contract traded at USD14.6338 a bushel, rallying 2.6%.
Soy prices rallied, as the same hot, dry weather that boosted corn was seen benefitting soy futures as well. Soybeans are grown in many of the same regions across the U.S. as corn, but the key growing phase for soybeans does not start until later in the summer.
Cropcast also cut its soybean yield forecast to 42.4 bushels per acre, from its previous forecast of 44.1 and USDA’s outlook of 43.9.
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.
Market participants were awaiting the release of the USDA’s weekly crop progress report due out after Monday’s closing bell on the CBOT.
In its last crop condition report, the USDA said 63% of the corn crop was in good-to-excellent condition, down from 66% the previous week and below the 70% rating a year ago.
The USDA also said soybean conditions dropped to 56% good-to-excellent from the previous week’s rating of 60%, while winter-wheat crops were rated 54% good-to-excellent, compared to 53% the previous week.
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