U.S. grain futures rose on Tuesday on concerns that unfavourable crop weather could threaten domestic production, as the markets temporarily shook off the weight of massive global inventories.
Above-normal temperatures in recent weeks have brought the U.S. hard red winter wheat crop, grown in the Great Plains, out of dormancy earlier than normal, leaving the crop vulnerable to damage if a late-spring freeze hits the region.
Some corn and soybean traders also were worrying about the weather, even though those crops will not be planted for weeks.
“Corn bulls are keeping an eye on U.S. weather as many inside the trade start to worry about pockets of dry conditions in the southwest Plains and problems with too much rainfall and flooding in parts of the Delta,” said Kevin Van Trump, president of Missouri-based consultancy Farm Direction.
The Chicago Board of Trade’s most actively traded May corn contract was up 0.6 percent to $3.61-1/4 a bushel by 11:40 a.m. CST (1740 GMT) after reaching its highest price since Feb. 25.
The weather-fueled gains will likely be short-lived, with a return to $4 a bushel in corn looking “like a million miles away,” Van Trump said. Corn prices have dropped by half in the past three years as large harvests have built up supplies.
May wheat rose 0.4 percent to $4.64-3/4 a bushel, while May soybeans edged up 0.2 percent to $8.83-3/4 a bushel. On Monday, both markets reached their highest levels since Feb. 22 after U.S. data showed investors had built up short positions.
On Wednesday, traders expect the U.S. Department of Agriculture, in a monthly supply and demand report, to further increase its estimates for global corn and soybean inventories from February.
Yet, concerns about massive supplies may already be factored in to the markets, said Rich Nelson, chief strategist for Illinois-based brokerage Allendale.
“In general a lot of people questioning whether we need to be down at these prices,” Nelson said.
The USDA on Tuesday said private exporters struck deals to sell 110,000 metric tons of U.S. soybeans to top importer China for delivery during 2016/2017 marketing year, which began on September 1.
Exporters also reported sales of 140,000 metric tons of U.S. soybeans for delivery to unknown destinations. Of that total, 70,000 metric tons are for delivery during the 2015/2016 marketing year and 70,000 metric tons for delivery during the 2016/2017 marketing year.
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