Forexpros – U.S. grain futures ended Friday’s session mixed to higher, with corn prices hitting a two-week top and soy prices rising to a three-week high on the back of hot and dry weather conditions in major grain-growing regions in the U.S.
But wheat futures underperformed as investors sold contracts to lock in gains from the previous session’s impressive 3% rally.
According to trade source estimates, commodity funds bought a net 8,000 corn contracts on Friday and sold 4,000 soybean contracts and 3,000 wheat contracts.
Agricultural commodities shrugged off a broadly stronger U.S. dollar, as well as fears over a worsening debt crisis in the euro zone and a deeper-than-expected slowdown in Chinese economic activity.
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 settled at USD5.9988 a bushel by close of trade on Friday. Earlier in the day, prices rose to USD6.0550 a bushel, the highest since May 24.
On the week, corn futures rallied 6.75%, the biggest weekly gain since May 2011.
Prices touched a 17-month low of USD5.5138 a bushel on June 1. But sentiment on the grain has improved amid concerns that dry soil in the U.S. corn-belt could strain the development of crops in the region.
Temperatures are expected to reach the 90’s Fahrenheit in much of the corn-belt this weekend with only light rains, potentially threatening yields and reducing the quality of the harvest.
A surprise rate cut from top consumer China on Thursday further supported corn prices.
Prices have been well-supported below the USD6.00-level, amid speculation lower prices would encourage China to boost purchases of U.S. corn.
China’s state-owned grain-stockpiling agency, Sinograin, said last month that it was ready boost purchases to replenish depleted reserves if the prices are attractive.
China is expected to raise its 2012-13 corn imports to 6 million tonnes, up from the 2011-12 estimates of 5.5 million tonnes.
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, while China is the world’s largest consumer of the grain.
Elsewhere on the Chicago Board of Trade, soybeans for July delivery settled at USD14.2838 a bushel by close of trade Friday. Earlier in the day, prices rose to USD14.3863 a bushel, the highest since March 17.
On the week, soy futures jumped 5.52%, the largest weekly gain since March.
The U.S. Department of Agriculture announced a sale of 530,000 metric tonnes of soybeans on Friday, mostly to China.
China will import more corn and soybeans next season to keep pace with growing domestic demand, state-owned Sinograin said.
Soy futures also drew support from a surprise Chinese rate cut on Thursday as well as hot and dry weather across key soy-growing regions in the U.S.
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.
Prices fell to a seven-week low of USD13.2688 a bushel on June 1, as hedge funds and large institutional investors unwound long positions to secure gains from an impressive 19% rally in the first five months of the year.
But sentiment on the grain has improved in recent sessions, as purchases by top importer China and an ongoing Argentine labor dispute helped prices. Argentina is one of the world’s biggest exporters of corn and soybeans.
Investment funds bought 8,000 soybean contracts on Wednesday, most since mid-May.
Meanwhile, wheat for July delivery settled at USD6.3013 a bushel by close of trade on Friday. Earlier in the day, prices hit a session low of USD6.2788 a bushel. On the week, wheat futures advanced 2.62%.
Wheat prices surged more than 3% on Thursday amid expectations the USDA will cut its forecast for next year’s harvest. The agency will release its monthly supply and demand report for June on Tuesday.
But prices retreated almost 2% on Friday, as the same hot, dry weather that boosted corn was seen benefitting a rapid pace of harvest for the upcoming winter crop. Wheat is heading into a harvest weekend.
Wheat prices have been on the decline since touching an eight-month high of USD7.2138 on May 21, as technical selling and rains in parts of Russia and Australia eased crop concerns.
Australia is the world’s second-largest wheat shipper and Russia is the fourth-biggest in the 2012-2013 season, according to the U.S. Department of Agriculture.
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, grains traders will focus their attention to the USDA’s monthly crop production and stocks reports, which will be released Tuesday.
Analysts expect the government to lower its U.S. corn and soybean ending stocks estimates for the current marketing year, while likely also trimming its forecast for U.S. winter wheat production.
Market participants will also focus on the USDA’s weekly crop progress and plating progress reports on Monday, as well as Thursday’s weekly exports data.
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