Chicago | Reuters — U.S. wheat futures jumped to their highest level in six weeks on Thursday on worries that rains in the U.S. Plains next week will be insufficient to relieve intensifying drought conditions.
Traders kept their eyes on weather forecasts after dryness in key parts of the Plains, including Nebraska and Oklahoma, sparked strong gains earlier in the week. Drought in the region is expanding, just as the hard red winter variety of bread wheat grown there is entering its critical growth phase.
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A weekly U.S. Drought Monitor, issued by state and federal climate experts, said nearly 36 per cent of the High Plains from Kansas to North Dakota was in moderate to exceptional drought, up from 28 per cent a week ago.
“The coming rains may not be enough to change people’s perception of this issue,” said Rich Nelson, chief strategist for Illinois brokerage Allendale.
Chicago Board of Trade May wheat ended up 7-3/4 cents at $5.36-1/4 a bushel after hitting a session high of $5.44-1/4, the highest price for a front-month contract since Feb. 17 (all figures US$).
CBOT May corn rose 4-3/4 cents to $3.86-1/2 a bushel, while May soybeans slipped 3-3/4 cents to $9.86 a bushel.
Short-covering and global demand for wheat helped lift prices, traders said.
Saudi Arabia’s state wheat buying agency said it issued a tender to buy 715,000 tonnes of hard wheat.
The agency is not expected to purchase U.S. wheat, but “when you’re talking over 700,000 tonnes, it gets some attention,” Nelson said.
“Buyers are showing interest in world production,” he added.
Last week, Algeria’s state grains agency bought about 650,000 tonnes of optional-origin milling wheat in a tender, more than the 450,000 tonnes initially reported, traders said.
Concerns about weak overseas demand weighed on soybean prices, traders said, with the U.S. Department of Agriculture reporting old-crop U.S. export sales last week were 27,400 tonnes. That was below estimates for 150,000 to 300,000 tonnes.
New-crop export sales of 568,300 tonnes were bigger than expected.
Separately, USDA said private exporters struck deals to sell 118,000 tonnes of U.S. soybeans to unknown destinations for delivery in the 2015/16 crop year.
“Soybeans are shrugging off the sale,” said Karl Setzer, risk management team leader at MaxYield Cooperative in Iowa. The U.S. has “plenty of inventory to satisfy demand,” he added.
The CBOT is closed on Friday for the Good Friday holiday.
— Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Nigel Hunt in London, Naveen Thukral in Singapore and Michael Hogan in Hamburg.
