Forexpros – U.S. grain futures advanced during European morning trade on Tuesday, with corn hitting a 10-month high and soy prices rallying to a four-year top after the U.S. Department of Agriculture said that U.S. crop ratings declined to the lowest levels for this time of year since 1988 last week.
Grain traders have been focusing mostly on market fundamentals, such as weather, in recent weeks. Agricultural traders pay close attention to the weather because farmers need favorable conditions to grow large crops to replenish low inventories.
Updated weather forecasts showed that dry weather was expected to keep stress on U.S. Midwest corn and soybean crops for at least the next few days, with only minor amounts of rain expected late next week.
On the Chicago Mercantile Exchange, corn futures for July delivery traded at USD7.0200 a bushel, rallying 1.65%. Front-month prices rose by as much as 1.7% earlier to hit USD7.0225 a bushel, the highest since September 20, 2011.
The September corn contract traded at USD6.6450 a bushel, jumping 1.9%.
Corn futures rallied after the U.S. Department of Agriculture’s weekly crop progress report showed that the recent adverse weather conditions across the U.S. Midwest and Great Plains-region caused significant damage to crops.
In its crop progress report published after Monday’s closing bell, the USDA said that 48% of the U.S. corn crop was rated in ‘good’ to excellent’ condition as of July 1, down sharply from 56% the previous week and below the 69% recorded in the same week a year earlier.
The report showed that 62% of the crop in Iowa was rated ‘good’ to ‘excellent’, down from 68% the previous week, while only 26% of the crop was rated ‘good’ to ‘excellent’ in Illinois, compared to 37% in the week before.
Iowa and Illinois are the two largest corn growing states in the U.S., accounting for nearly 29% of U.S. supplies.
Corn prices have been well-supported in recent weeks 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.
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, soybeans futures for July delivery traded at USD15.4625 a bushel, gaining 1%. Front-month prices hit USD15.4950 a bushel earlier in the day, the highest since July 17, 2008.
The August soy contract traded at USD15.1175 a bushel, adding 1.2%.
Soy prices have rallied in recent weeks, 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.
The USDA said 45% of the soybean crop was rated ‘good’ to ‘excellent’ last week, down from 53% the previous week. Nearly 66% of the crop was ‘good’ to ‘excellent’ in the same week a year earlier.
Market talk that top consumer China purchased nearly 1.2 million tonnes of soybeans from U.S. farmers provided further support. It was the fifth largest single-day U.S. soy export sale on record.
Meanwhile, wheat for July delivery traded at USD7.5950 a bushel, climbing 1.6%. The front-month contract hit USD7.6350 a bushel earlier in the day, the highest since September 7, 2011.
The September wheat contract traded at USD7.7812 a bushel, adding 0.65%.
Wheat prices have rallied sharply in recent weeks, tracking strong gains in corn and amid speculation the USDA 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.
The International Grains Council cut its forecast for global wheat production in the 2012-13 season to 665 million tonnes from a previous forecast of 671 million, citing damage to crops in Russia.
Concerns over a disruption to supplies from the Black Sea-region lent further support, as traders continued to monitor weather conditions across the region amid concerns over crop conditions in Russia and Ukraine.
Russia is a major wheat exporter and competes with the U.S. for business on the global market. A downbeat Russian crop outlook could boost demand for U.S. supplies, which is the world’s third largest wheat producer and biggest exporter.
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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