PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:29 GMT, Monday, 26th Aug 2013, by Agrimoney.com
Morning markets: US heatwave talk boosts corn, soy futures

Corn and soybean futures soared as weather fears for the US crop shifted up a gear, with the weekend proving largely dry in the Midwest, and the expectations of a heatwave this week intensifying.

Corn for December hit $4.89 a bushel at one point, a gain of 4.0% and the highest for the contract in a month.

Soybeans for November reached $13.94 a bushel, a gain of 5.0%, and the contract's highest in 11 months.

The gains came followed a weekend which delivered only a few showers, albeit largely in the Corn Belt where rain is particularly needed, but with amounts at best 0.75 inches, according to weather service MDA.

The weekend also failed, as Midwest farmers had been hoping, to ameliorate expectations for high temperatures this week.

"Mostly dry weather and very warmer temperatures this week will maintain moisture stress," MDA said.

'Heat can only be called extreme'

David Tolleris at WxRisk.com restated a forecast for many parts of the US to see the hottest Labor Day weekend (next weekend) on record.

Updated prices as of 07:45 Chicago time (13:45 UK time)

Chicago soybeans (November): $13.87 a bushel, (+4.5%)

Chicago corn (December): $4.89 a bushel, (+4.2%)

Kuala Lumpur palm oil (November): 2,434 ringgit a tonne, (+3.3%). Market closed

Chicago wheat (December): $6.58 a bushel, (+1.9%)

Paris wheat (November): E188.50 a tonne, (+1.6%)

"The next seven-to-10 days over the Plains and the western Corn Belt will be hot and dry," Mr Tolleris said.

"Given that it is late August and early September the heat can only be called extreme or record breaking."

That could prove particularly deleterious to soybeans, which are more sensitive to weather at this time of year, during pod-setting and pod-filling

"The damage to soybeans could be severe as there is no chance of seeing any rain over 0.10 inches/ 2mm in the central Plains and western Corn Belt through September 1," Mr Tolleris said.

Contrast to 2012

The conditions represent the opposite of those last year, when a wet spell in late August revived crops after a dearth of rains for most of the summer, which left a huge area of the US in drought.

"Last year's US soybean crop turned out to be better than expected as late August/early September rains added pods and to final yields," Kim Rugel at Benson Quinn Commodities said.

"This year's precipitation has been the opposite, with soybeans wet early and dry late during the key yield-determining pod-set and pod-fill phase of the crop. Hence, the rally."

Another broker said: "The crowd is pricing in extra risk premium. Some of the short positions are probably getting squeezed out which would also add to the rally."

In fact, hedge funds undertook their second largest bullish swing in positioning on soybean futures and options on record in the week to August 20, extending their net long position by more than 50,000 contracts to take it just short of 100,000 lots.

Even so, that is well below a level above 140,000 contracts seen in June, with the record net long at more than 250,000 contracts, reached last year.

Tour findings

As an extra concern, Monday also offered the first opportunity to react to data from the Pro-Farmer crop tour which, late on Friday, revealed expectations for yields and production below those forecast by the US Department of Agriculture.

For soybeans, the tour forecast a crop of 3.158bn bushels, on a yield of 41.8 bushels, below USDA expectations of 3.255bn bushels and 42.6 bushels per acre.

For corn, production was pegged at 13.46bn bushels on a yield of 154.1 bushels per acre.

The USDA has the figures at 13.763bn bushels and 154.4 bushels per acre.

The tour data, which do have a history of underestimates, also include lower estimates for harvested area.

Prices soar

In Chicago, November soybeans stood 3.6% up at $13.75 a bushel at 09:15 UK time (03:15 Chicago time).

At that level, the contract was up more than $2 a bushel, or $18%, from an August 7 low, when weather was suggesting far bigger crops.

Corn for December was up 3.3% at $4.85 a bushel.

That left the corn: soybean ratio at a historically high 2.83: 1.

Saudi order

The performance helped lift Chicago wheat too, which gained an extra fillip from a purchase by Saudi Arabica's official Grain Silos and Flour Mills Organisation of 720,000 tonnes of hard wheat over the weekend.

The purchase, a little more than tendered for, comprised cargoes priced at between $293.50-$311.42 a tonne C&F, a difference based in part on port delivered to.

The accepted origins for the wheat are Australia, the European Union, and North and South America and, at the sellers' option, the GSFMO said.

Chicago wheat for December jumped 1.8% to $6.57 a bushel.

Elsewhere, palm oil jumped in Kuala Lumpur too, adding 2.6% to 2,428 ringgit a tonne for November, a two-month high for a benchmark contract, lifted by the weakened expectations for US soybeans, the source of rival vegetable oil soyoil.

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