Grains got off to a flying start, with corn hitting a one-year high, helped by growing concerns for dryness in Argentina, as well as upbeat conditions in external markets.

Indeed, Japan's Nikkei share index closed up 1.8%, helped by an upbeat finish to last week on Wall Street, when Ben Bernanke, the Federal Reserve chairman, cheered investors by saying that the central bank was ready to act, "especially if the outlook were to deteriorate significantly".

Shanghai shares were 1.5% higher, with crude oil stable and the dollar down 0.2% at 06:45 GMT (07:45 UK time), doing its bit to improve the appeal of dollar-denominated assets, such as Chicago crops.

'Unfavourably dry'

But that wasn't all wheat had going for it, after forecasters acknowledged some difficulties Argentine farmers face to their newly seeded crop.

Argentina is the southern hemisphere's second-ranked wheat exporter, and viewed as a competitive shipper too.

"Western wheat areas remain unfavourably dry for germination," forecasters at Meteorlogix said.

At Commonwealth Bank of Australia, Like Mathews said: "Drought conditions in Argentina� warrant monitoring", flagging also the slow maturation of Canadian wheat which, after a horrendously wet spring, is some two weeks behind, pushing harvest back � and leaving crops at risk of being caught by the first frosts.

(Not that frost risks are appearing on weather forecasts as of yet.)

'Likely to close higher'

Meanwhile, in Russia, while drought-stricken farms are receiving some rains, precipitation is hardly generous, with showers of at best 0.8 inches received over the weekend.

"Much more rain would be needed to end drought conditions," Meteorlogix said in its forecast for Russia and Ukraine.

Phillip Securities in Singapore flagged Russia's continuing woes as reason behind an expectation that "wheat is likely to close higher" on Monday.

The grain certainly made good ground in early deals in Chicago, adding 2.5% to $6.79 a bushel for September delivery.

"We think Russia's grain imports are likely to be more than 3.0m tonnes" in 2010-11, the broker added, contrasting their forecast with the 2.4m-tonne figure released by the US Department of Agriculture's attach� in Moscow last week.

Too dry 

Corn, meanwhile, was helped not just by Argentina's dryness but also by persistent concerns about the US crop, and reports that yields are not living up to expectations.

"After receiving an abundance � in some cases excess - of moisture this summer, many areas have received little rain that past couple weeks, which would have been nice for corn and [soybean] pod fill," Mike Mawdsley at Market 1 said.

And extra fillip for the crop came from regulatory data showing that the worryingly large net long position managed funds held in corn futures (worrying in terms of raising the question of where the next buyer was coming from) had eased last week, by 21,000 contracts to 275,800 lots.

In the bag 

Meanwhile, storage bags are offering farmers a way to avoid a weakening basis, and ease pressure on near-term Chicago contracts.

"Ports are near capacity so they are backing off of their bids, resulting in Gulf [of Mexico] values slipping 3 cents" a bushel last week, Kevin Kjorsvik at Benson Quinn Commodities said.

"Weakening basis levels are providing greater incentives for the country to find innovative storage solutions. Storing grain in large industrial plastic bags is one way the country is hoping to carry the crop into more favourable pricing terms later in the marketing year.

"Typically used for storing silage, corn kernels will now be encapsulated in an airtight seal at a cost of roughly 12 cents a bushel."

This system had shown "mixed results" last year, when used by northern plans farmers for storing barley and wheat, albeit "wet", over the winter.

Chicago corn for September added 1.6% to $4.37 � a bushel, the highest for a spot contract since June last year.

Return of sudden death syndrome

US weather fears helped soybeans too, along with the return of sudden death syndrome, or SDS, the fungal disease, as a significant market theme.

"Concerns about yields in soybeans will soon be in the news as no one knows how much damage SDS may be this fall," Mr Mawdsley said.

Managed funds also reduced a sizeable net long position in soybeans too, latest regulatory data showed.

Soybeans for September added 0.4% to $10.26 a bushel, with the November contract up 0.5% at $10.31 � a bushel.

Squeeze ahead? 

Kuala Lumpur palm oil also continued its revival, helped by last week's upbeat outlook from Godrej International analyst Dorab Mistry, as well as potential support from a US soybean crop which looks to fall below previous expectations.

Soyoil is palm oil's major competitor in vegetable oil markets.

Meanwhile, forthcoming festivals such as Eid Al-Fitr are raising hopes for demand, while likely to prove a hindrance to production as workers take time off.

Kuala Lumpur's benchmark November lot rose 1.5% to 2,580 ringgit a tonne.