Soybean and, especially, corn futures extended gains as weather forecasts for the Midwest turned up the heat, sparking "massive panic buying" by investors, who have been betting on huge US crops.
Row crop prices which had started strong, on forecasts for high temperatures and little rain relief in the Midwest this week, ended not too far from intraday highs as concerns gained traction that the heatwave will last into next week.
While the GFS "had been promising a break in the ridge by Sunday/Monday", the midday run of the weather model "was not near as promising and that prompted another round of buying in corn", Darrell Holaday at Country Futures said.
The GFS model "has a done a bit of a reversal in that is now shows the heat ridge is not going to go way as fast as what the model was showing this morning", David Tolleris at WxRisk.com said.
'Model is wrong'
There was some scepticism over the bullishness of the forecast.
"For what it's worth, I think that the GFS model here is wrong and that it is holding on to the hot pattern to long," Mr Tolleris said.
Mr Holaday said: "The only surprise is the fact that people are surprised that it is warm and dry this week," a factor which had for a while "clearly been projected in the weather models".
Furthermore, the upside of the forecast for extended heat is that ideas of an early frost, viewed as a particular threat to soybeans, disappeared off the radar.
'Massive panic buying'
However, on markets, traffic was one way, with markets staying firmly in positive territory.
(In fact, Chicago corn, soybeans and wheat, and Kuala Lumpur palm oil, and Paris rapeseed and wheat "gapped" higher – putting a gap in their charts between Monday's trading range and Friday's).
"The hot and dry conditions in the Midwest, along with forecasts of that continuing, has prompted massive panic buying in the corn and soybeans," Mr Holaday said.
Broker Doane said: "It's all weather … weather … weather in the grains as stress continued on much of the corn and soybean belt last week and over the weekend the forecasts for the coming week got even hotter and drier.
"Nothing less than "panic buying" is evident in today's corn and soybean futures, with wheat tagging along for the ride."
Hedge fund positions
Such buying has been fuelled by covering of short positions.
Hedge funds were not so exposed in soybeans to crop fears, already having a net long position, as of last Tuesday, although one which left considerable scope for expansion.
(Net long positions mean that long bets, which profit when prices rise, outnumber short holdings, which benefit when values fall.)
However, in corn, while hedge funds covered a stack of short positions in the week to last Tuesday, they remained net short to the tune of 91,778 lots – an amount which, until a month ago, would have been a record level.
Corn vs soybeans
It was clamour to cover corn which was one reason why benchmark December futures in the grain fared especially well in Chicago, soaring 6.3% to close at $5.00 ½ a bushel.
While below the $5.08 ¼ a bushel reached earlier, a one-month high, this at least gave corn bulls the reassurance of a close above the 50-day moving average for the first time since June.
Another was the reclaiming by corn of some of the unusually high premium vs soybeans, which for November closed up 4.6% at $13.89 ½ a bushel, an 11-month closing high.
That narrowed the soybean: corn ratio back below 2.8, to 2.78: 1, albeit still a historically high level.
It is soybeans over which the concerns of yield loss to the current heat are the greatest.
"The market has already priced in portion of lower yield potential," Richard Feltes at RJ O'Brien said.
"The challenge ahead is discerning whether the 2013 US soybean yield could slip below 40 bushels per acre," from the 42.6 bushels per acre the US Department of Agriculture has forecast, an idea "which could trigger even higher prices into the three-day Labor Day weekend".
US Commodities said that for corn, even with some losses to heat "the buffer would shrink, but US ending stocks would still be large.
"Soybeans are more of a concern. If the yield on soybeans slips 1.5 bushels per acre, the ending stocks would move to pipeline minimum," the broker said.
"If yields shrink 2 bushels per acre, the ending stocks on soybeans would be under pipeline minimums."
'Likely damaging wheat'
Wheat, eventually, got quite a tug from the performance of corn too, with its premium over its fellow grain, which had stood at more than $2 a bushel a few weeks ago, being eroded.
Wheat also got support from a large order by Saudi Arabia of the grain, of 720,000 tonnes, and by concerns of frost damage to the crop in Argentina.
"Temperatures dropped below freezing over the weekend, with lows reaching the upper 10s [Fahrenheit] in portions of Buenos Aires, likely damaging the wheat crop," weather service MDA said.
Wheat for December closed up 3.2% at $6.66 ¾ a bushel in Chicago, earlier touching its 50-day moving average for the first time in two months.
Paris wheat for November, jumping 3.43% to E191.75 a tonne, actually managed to close above its 50-day line for the first time since May.
The day was considerably quieter among soft commodities, although they managed some gains too, with cotton adding 0.7% to 84.08 cents a pound in New York for December.
The fibre gained some support from US heat, and from rises in corn and soybeans, ahead of South American planting season in which the crops compete.
Raw sugar for October added 0.8% to 16.61 cents a pound on ideas of further frost in Brazil, although this appeared to likely to come in too far south to hit the heart of cane-growing country.
"Temperatures will turn very cold over the next few days, with frost expected in Rio Grande do Sul and Santa Catarina," MDA said, but flagged the risk of "damaging heading wheat".
Still, the frost idea helped arabica coffee make ground too, closing up 0.6% at 117.75 cents a pound in New York for December delivery, the contract's first positive close in eight sessions.
Indeed, it helped offset the negative of a return to weakness in Brazil's real, which dropped 1.7% against the dollar, lowering the value in dollar terms of Brazilian assets.