Soy, wheat climb on weather worries

Tuesday, 07 February 2012 00:12

WINNIPEG/CHICAGO: Chicago soybean futures rose to the highest level in more than three months on Monday and wheat also gained ground, as dry weather in soy-growing parts of South America and a deep freeze of European wheat fields raised production worries.

Soybeans and wheat shrugged off pressure from a firm US dollar and weaker crude oil, but corn slipped, with the market's focus this week on a key crop report to be issued by the US Department of Agriculture on Thursday.

China is likely to buy more US soybeans this quarter, as a withering drought is expected to cut the South American harvest. Cash bids were rising for immediate delivery at the US Gulf amid thin exportable supplies.

"We're a little more competitive now when you look at price and exchange rates and we're seeing more of those private estimates dropping for South American soybean production," said Arlan Suderman, market analyst at Farm Futures magazine.

"We need to see harder confirmation of the export business to China but traders are pretty quick to get excited just on the thought and the possibility."

Chicago Board of Trade March soy rose 0.6 percent or 7-1/4 cents to $12.39-3/4 a bushel by at 11:23 a.m. CST (1722 GMT after peaking at $12.44, the highest level for the front month since late October 2011. Soybeans have settled higher four straight sessions.

Argentina's 2011/12 soy harvest will be at least 47 million tonnes, a government source said on Monday, while a Reuters poll showed analysts expect production of 45 million to 50 million tonnes.

Brazil's projected soybean crop - the world's second biggest - is also tumbling, and grain analysts Celeres trimmed its estimate on Monday to 72.04 million tonnes from 74.4 million tonnes in early January.

Closely watched analytics firm Informa Economics lowered its forecast on Friday for soy production in Argentina and Brazil.

Rains have been forecast this week in key growing regions of Argentina but dry weather over the past month was likely to reduce yields in the No. 3 world soy exporter.

March CBOT wheat added 0.9 percent or 6 cents at $6.66-3/4 a bushel, underpinned by cold-weather damage to some European winter wheat crops.

"Even though temperatures aren't going to be as bitterly cold as they have been, the cold temperatures have expanded outwards and are now encompassing parts of France," said Terry Reilly, analyst at Citigroup in Chicago.

The winter has been milder in the US Northern Plains and Western Canada, but spring wheat areas there are drier than normal ahead of planting season, he said.

CBOT March corn shed 0.2 percent or 1-1/2 cents at $6.43 a bushel, with investors soured by the nearby month's failure to advance higher than $6.50 last week, Suderman said.

In the US Department of Agriculture's supply-demand report on Thursday, the trade expects it to cut estimates for South American soybeans and corn.