Forexpros – U.S. grain futures were broadly higher during European morning trade on Wednesday, with corn and soy prices rallying more than 1% as investors entered the market ahead of a policy-setting meeting by the European Central Bank later in the day, amid hopes for more stimulus.
Agricultural commodities also climbed on the possibility the Federal Reserve will consider more action to stimulate growth in the world’s largest economy.
Market sentiment was boosted as investors hung on to hopes for action by global central banks and other authorities to stimulate growth and boost the world economy.
Finance ministers from the Group of Seven industrialized nations held a teleconference call on Tuesday to discuss the euro zone’s escalating debt crisis, however no major agreements or plans were formed.
Markets now shift their attention to the European Central Bank’s monetary policy meetings later in the day.
Although the market consensus is that it will hold its key interest rate unchanged at 1%, there is some speculation by market players that the ECB could announce liquidity injections in to Europe’s troubled financial system.
Others expect the central bank to renew its suspended government bond-buying program to help ease pressure on Spain’s rising borrowing costs.
In addition, Federal Reserve Chairman Ben Bernanke will testify on Thursday before a congressional committee about the state of the U.S. economy.
The Wall Street Journal, citing interviews and Fed speeches, reported late Tuesday that the U.S. central bank is mulling new measures to stimulate growth in the world’s largest economy.
The news prompted investors to pile in to riskier assets, such as stocks and commodities and shin traditional safe haven assets like the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.35% at 82.59.
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, corn futures for July delivery traded at USD5.7338 a bushel, climbing 1.05%. It earlier rose by as much 1.15% to trade at a session high of USD5.7363 a bushel.
Prices touched a 17-month low of USD5.5138 a bushel on June 1.
Corn prices were supported by concerns that dry soil in the U.S. corn-belt could strain the development of crops in the region.
Speculation that the People’s Bank of China could act to stimulate the economy and avoid a ‘hard landing’ provided further support.
State-run China Securities Journal wrote in a front page commentary that current conditions in China are “ripe” for a cut in interest rate, as inflation pressure is easing.
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, soybeans futures for July delivery traded at USD13.6613 a bushel, adding 1.2%. It earlier rose by as much as 1.35% to trade at a four-day high of USD13.6763 a bushel.
Prices fell to a seven-week low of USD13.2688 a bushel on June 1.
Soy prices advances as concerns lingered over crops in Brazil. The Brazilian government food supply agency Conab on Tuesday further trimmed its 2011-12 soybean crop estimate, as severe drought conditions damaged crops.
Soy prices rallied nearly 19% in the first five months of the year, as market sentiment was dominated by concerns over distressed crops in major South American soy growers.
But futures are down nearly 11.5% since touching a four-year high of USD15.1237 a bushel on May 2, as hedge funds and large institutional investors unwound long positions.
Meanwhile, wheat for July delivery traded at USD6.1925 a bushel, climbing 0.99%. It earlier rose by as much as 1.1% to trade at a daily high of USD6.1950.
Wheat futures regained strength after losing more than 2% in the previous session, amid easing concerns over U.S. crop conditions.
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.
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