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Freeze and rain fears send crops soaring

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US crops' initial march ahead accelerated into a sprint as fears of harsh weather, compounded by fund buying sent prices soaring.

Bulls gained a clean sweep, with soybeans soaring 5.2% in Chicago, corn 5.2% and wheat 5.6%.

Other exchanges joined the rally, with Kansas wheat adding 5.4% to close above $5 a bushel for the first time since August.

The trigger was the spread of cold weather across the US, which also sent oil higher. New York crude was 2.0% up at $73.17 a barrel as traders digested a forecast from America's National Weather Service of higher-than-normal demand for heating oil.

'Growing-season-ending freeze'

For crops, the weather has meant hard frosts in many areas with corn and soybean crops waiting to be harvested, and wet weather in southern areas trying to get crops into the bin.

Over the weekend, many areas of the US had some snow, with "some heavy snow observed over central Nebraska", Meteorlogix said.

Temperatures in the west of the Midwest were "below to much below normal", particularly on Sunday, which saw a "a growing-season-ending freeze in all areas except northern Missouri". The frost was lighter in the east Midwest, but a frost nonetheless.

Looking ahead temperatures will be "below to much below normal" throughout the Midwest this week, Meteorlogix said, adding: "Freezing temperatures in the western Midwest could damage any immature crop.

"The weather pattern will remain unfavourable for crop drydown and the harvest.

Ducks in a row

With the dollar also easing, amid thoughts of a decent quarterly earnings season in the US, and investors seeking protection from prospective inflation by getting into assets, the scene was set for a rally in crops.

Much of the attention was taken by corn, which as an autumn crop delayed by a late planting, looks particularly vulnerable to frost. (Wheat farmers may actually be helped a touch, as the hard ground allows easier harvesting of the last spring-planted crops.)

Some analysts estimated losses at 100m-200m bushels, which would be enough to drive the harvest back to 12.8bn-12.9bn bushels.

Corn for December ended up 19 cents at $3.81 ¼ a bushel, its best close since late June.

French downgrade

Soybeans, another autumn-harvested crop, were also helped, although as a less-delayed crop they did slightly less well in percentage terms.

Beans for November ended 35 cents higher at $9.99 a bushel, the highest finish for more than a month.

Wheat joined the rally too, adding 26.25 cents to $4.94 ¼ a bushel for December delivery.

Besides spillover support, there were some fundamentals in the grain's favour, notably a 1m-tonne downgrade by France to its crop – the biggest in Europe.

Indeed European contracts ended higher, as did Kansas wheat, which ended 26 cents to the good at $5.11 a bushel for December delivery.

By Agrimoney.com

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