Corn futures join wheat in rally, as US weather fears worsen

Wheat prices held near one-year highs, boosted by concerns over Ukraine and the drought-hit US crop, as corn futures staged a late rally, spurred by less benign weather forecasts and strong export data.

Soft red winter wheat futures for July stood at $7.34 a bushel in Chicago with 20 minutes of trading left to go, up 2.5% and heading for what would be the highest finish for a nearest-but-one contract since February last year.

The performance by the world benchmark wheat was strong enough to enable the contract to regain a little of its discount against Kansas City hard red winter wheat for July, which was up 1.7% at $8.36 a bushel.

Hard red winter wheat is the variety at the centre of concerns over drought damage which only worsened over the weekend, as temperatures soared in its southern Plains heartland.

'Temperatures soared to record levels'

"Weather conditions in the southern Plains turned hot with temperatures reaching over 90 degrees Fahrenheit in many locations, and reports of temperatures over 100 degrees in south central Kansas," Citigroup's Sterling Smith said.

"The crop came into this heat already stressed from cold weather and stressed from an ongoing drought."

Benson Quinn Commodities said: "Temperatures soared to record levels  - high 90s to over 100  Fahrenheit across Kansas on Sunday - over the drought stressed hard red winter wheat."

The poor condition of the US crop was confirmed in a crop tour of Kansas, the top US producing state, last week, and is expected to be underlined by weekly US Department of Agriculture crop progress data due later on Monday.

"Look for winter wheat conditions to decline in the west," Benson Quinn Commodities said.

'Increasing stress and losses'

And the prospect of further deterioration rose as weather models reduced what little rain there was in the forecast for the southern Plains for this week.

MDA trimmed its outlook for rainfall amounts to at best 1.5 inches, and coverage to 20%.

"Dryness will continue across south western areas," the weather service said, adding that "current heat is increasing stress and losses on the wheat".

As an extra boost to prices, the tensions in Ukraine, where US officials highlighted reduced potential for this year's grains harvests, showed no signs of easing off.

The spread of violence to Odessa, home to a major grains exporting port, has only added to investor jitters.

Strong exports

That was a boost to corn too, with Ukraine a major exporter of the grain.

Indeed, it is a bigger shipper of corn than of wheat, although the Black Sea region as a whole is strategically key to world wheat supplies.

And as an extra boost, the US unveiled strong corn exports last week, of 1.24m tonnes, above the 1.16m tonnes the week before, and at the top end of market expectations.

Furthermore, conditions for US corn plantings turned a little less helpful, with a wetter outlook for later in the week, potentially slowing fieldwork.

'Could stall plantings'

"Rain is back in the forecast for second half of this week which could stall plantings," CHS Hedging said.

MDA said that "planting will progress well early this week, but will stall later this week as rains return to much of the region".

Still, there is also a healthy debate as to how much sowings have already been completed, after what was a pretty open weekend for Midwest fieldwork.

"Planting progress started late last week and is in full gear throughout the major producing areas," Darrell Holaday at Country Futures said.

Data later

According to Doane, "corn planting progress expected to increase to 35-40% as of May 4, versus a 10-year average of 47%".

CHS said that "planting progress report this afternoon is expected to show 27-29% planted versus 19% last week and a five-year average of 42%."

Benson Quinn Commodities said that "the market is looking for corn planting as of Sunday at 24-27% complete compared to 12% last year and near 45% average".

According to Reuters, corn sowing is actually expected by analysts to be 33% finished.

Whatever, with the markets looking to the future, the strong progress from 19% finished a week before could not stop corn for July soaring 1.8% to $5.08 a bushel.

Huge inventories

Soybeans, however, could not maintain early resilience, undermined in part by a steep drop-off in US exports, at 99,500 tonnes last week, down from more than 250,000 tonnes the week before,

Furthermore, elsewhere in the oilseeds complex, Statistics Canada estimated Canadian canola inventories as of the end of March at a record 9.02m tonnes, a touch above market estimates, and double those a year before.

Canola for July eased 0.5% to Can$477.80 a tonne in late deals in Winnipeg, while close-relation rapeseed edged 0.3% lower to E258.50 a tonne in Paris, for November delivery.

Soybeans also faced pressure from an upgrade by Informa Economics to 87.4m tonnes, from 86.75m tonnes, in its forecast for Brazilian production of the oilseed, besides from disappointing economic data in China, the top importer.

Chicago soybeans for July were 0.4% lower at $14.65 a bushel.

'Torrential rains and planting delays'

Among soft commodities, movement was somewhat dampened by the close of London markets for a UK holiday.

However, cotton managed to extend its gains, standing 0.5% higher at 94.74 cents a pound in New York for July delivery, after the China Cotton Association cut its forecast for Chinese sowings, and with concerns over US growing conditions too.

"Hot weather in Texas," the top US producing state, "is continuing to provide support to the market," said Citigroup's Sterling Smith.

Broker Doane flagged "torrential rains and planting delays across the southern US contrasted by ongoing drought in Texas" as supportive for prices.

"Tight old-crop stocks are supportive to nearby cotton futures," Doane added.

Coffee gains

Arabica coffee for July added 1.0% to 205.25 cents a pound in New York, with weather forecasts remaining a little concerning.

While Somar forecast cooler temperatures over many coffee-growing areas, rains will be restricted to southern area, and the South East will see "higher temperatures".

Although there is little hope of much a recovery in this year's Brazilian coffee crop, hurt by early-2014 drought, there is still much to play for in terms of 2015 production.

Ukraine crisis to hit corn, wheat output - USDA
Hedge funds miss the mark betting on rising grains
Morning wheat: US wheat, Ukraine send wheat to one-year high
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events