Forexpros – U.S. grain futures ended Friday’s session higher, with wheat and soybean prices surging to multi-week highs on the back of concerns over crop conditions across major grain-growing regions around the world.
Corn prices settled higher, supported by concerns over lower yield prospects in the U.S. Midwest.
Agricultural commodities received an additional lift from outside influences on Friday, as market sentiment found mild support after the European Central Bank relaxed rules on collateral for central-bank loans.
On the Chicago Mercantile Exchange, wheat for July delivery settled at USD6.7425 a bushel by close of trade on Friday. Earlier in the day, prices rose to as high as USD6.8425 a bushel, the highest since May 25.
On the week, the front-month wheat contract jumped 8.97%.
Front-month wheat prices rallied sharply 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.
Elsewhere on the Chicago Board of Trade, corn futures for July delivery settled at USD5.9050 a bushel by close of trade on Friday. Earlier in the day, front-month prices rose to a session high of USD5.9975 a bushel.
On the week, the front-month corn contract advanced 1.73%.
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 on Thursday, 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.
Wall Street investment firm Morgan Stanley said in a report earlier in the week that corn prices could rally to as high as USD7.00 per bushel, citing dry weather conditions which could elicit a negative production surprise.
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.
Meanwhile, soybeans for July delivery settled at USD14.4175 a bushel by close of trade Friday. Earlier in the day, front-month prices rose to as high as USD14.6375 a bushel, the highest since May 8.
On the week, the front-month soy contract climbed 4.57%.
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.
In the week ahead, grains traders will focus on the USDA’s weekly crop progress report on Monday, as well as Thursday’s weekly exports data.
Corn and soybean traders will also pay close attention to weather conditions in the U.S. Midwest and Great Plains-region.
Dry weather is expected to keep stress on U.S. Midwest corn and soybean crops for at least the next few days, but recently updated weather forecasts showed better chances for rain late next week.
Meanwhile, wheat traders will focus on hot weather in the Black Sea region, amid concerns over crop conditions in Russia and Ukraine.
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