Corn futures soared more than 4% for the second time in three sessions, with soybeans jumping 3%, after a drier-than-expected Midwest weather at the weekend, and mixed hopes for rain relief, depressed harvest expectations.
Corn for December closed 4.7% higher at $4.85 ½ a bushel in Chicago, taking nearly to 9% its recovery from a near-three year low reached last Tuesday.
Soybeans for November closed 3.5% higher at $13.03 ¼ a bushel, the best close in two months. Indeed, it was the first finish above $13 a bushel since June.
The contract rebounded more than 12% from an August 7 low which was the contract's lowest in 14 months.
The recoveries reflected concerns that hotter and dry weather, which affected the western Corn Belt worse than had been expected over the weekend, may be here to stay, to the detriment of crop prospects.
CHS Hedging said: "Warm and dry weather patterns are pushing grain markets higher. Many areas are in need of some rain and plant stress is starting to become a large concern."
Broker Doane said forecasts "show additional stress in already dry areas more likely than any relief and it's particularly ominous for a good finish to soybean maturation in key production states such as Iowa".
At Country Futures, Darrell Holaday said: "The entire move is on the concern about the lack of moisture in the northern third of the Corn Belt and the fact that it will warm up this week.
"The increased temperature is what is desired, but they also need rain and the forecasts have not been very promising."
EU vs GFS
In fact, the European weather model does show moisture "returning to those critical areas after Friday and into next week", Mr Holaday said.
But the GFS weather model "continues to indicate a dry pattern with little moisture in those key areas".
And that is what investors seemed ready to trade on, with short-covering a key factor for hedge funds who were record short in corn futures and options as of last Tuesday – a position which always raises the question of whether there is appetite out there for further such positions.
"The bears have been a little concerned with the large short position the funds have built in corn during a time of rather bullish information flow," one US broker noted.
'Taking a toll'
And, after all, already "prolonged dryness in the Midwest is taking a toll on corn and soybeans", Gail Martell at Martell Crop Projections said, noting that weekend temperatures were 2-3 degrees Fahrenheit higher in Iowa over the weekend than the GFS model predicted.
"When fields become extremely dry, there is less evaporative cooling which, in turn, increases surface temperatures.
"Corn leaves begin curling in the afternoon to conserve crop moisture. This slows down plant activity, hindering kernel-filling."
For soybeans "damage may be worse than corn if the drought persists," Ms Martell said.
"August rainfall is the key determinant of the yield. Very heavy rains optimise the yield. "
However, "rainfall has been sparse in Iowa and Illinois, the two leading soy states".
Sowings data doubts
More will be known later when the US Department of Agriculture unveils weekly data on crop condition, when investors are expected a drop of 1-3 points in the proportion of corn and soybeans rated "good" or "excellent".
Furthermore, the ProFarmer tour of the Midwest will give a much-watched insight too.
Still, as an extra reason for investors to turn more bullish now, Farm Service Agency data last week, implying large cuts to official forecasts for corn and soybean sowings, continue to underpin sentiment.
While many brokers have cautioned investors to take the data with a pinch of salt, there is also the idea that the statistics cannot be ignored altogether.
"The trade is now anticipating planted corn acres to decline 2m acres and soybeans by about 500,000 acres after the release of the FSA number for August," US Commodities said.
'Continue to add value'
There was enough bullish sentiment, certainly, to down out bearish data on the demand side, with US weekly corn exports, as measured by cargo inspections, more than halving to 7.1m bushels.
Soybean exports rose to 5.3m bushels from 3.4m bushels.
At RJ O'Brien, Richard Feltes summed up soybeans' price prospect by saying that futures "will continue to add value if dry weather forecasts are sustained.
"There is no sign as yet of generous late summer rains that saved the soybean crop last year."
The rise in row crops helped wheat too, although this added a relatively modest 1.7% to $6.41 ½ a bushel in Chicago for September delivery, and by 1.6% to $6.53 ½ a bushel for December.
The grain is being restrained by better crop prospects abroad, including in France. Agritel upgraded its estimate for the French soft wheat crop to 37.0m tonnes, above the farm ministry estimate.
Furthermore, "warmer temperatures in the northern Plains have benefitted harvest progress in US spring wheat", Benson Quinn Commodities noted.
And there are doubts over the competitiveness of US wheat exports, although these took a bit of a back seat after weekly cargo inspections came in at 33.8m bushels, up 39% week on week.
Indeed, French wheat for November added a modest 0.4% to E184.50 a tonne, and London wheat for November 0.6% to £153.55 a tonne.
'Push up prices'
Among soft commodities, cocoa maintained its headway on concerns over weather setbacks to the Ivory Coast crop.
"Disappointing" reports on pod development, "coupled with the dry season which began earlier than usual," have been the main factors supporting prices, Joyce Liu at Phillip Futures said.
"It could be very likely that the cocoa deficit forecast for 2013-14 would start to widen and continue to push up prices."
Cocoa for December added 0.5% to £1,658 a tonne in London.
However, agricultural commodities in which Brazil is a major force struggled after the real weakened again, hitting R$2.40 to $1 for the first time since March 2009.
Arabica coffee for December shed 0.7% to 122.75 cents a pound in New York, while raw sugar tumbled 2.4% to 16.53 cents a pound, also depressed by an Indian farm ministry forecast of sugar output in 2013-14 higher than this season's.
Hedge funds also saw greater scope for selling in sugar after a huge covering of short positions in the week to last Tuesday.
"Friday night's Commitments of Traders report shows the funds have reduced their short considerably over the last reporting week and have perhaps now put the knife to another fund short-covering rally 'story/play'," Sucden Financial said.