SINGAPORE: US wheat and corn futures rose more than 1 percent on Tuesday, extending gains amid support from a weaker dollar and forecasts for tightening supplies as drought affects planting.
Asian equities climbed and the dollar fell against a basket of major currencies on reports that European officials are preparing a detailed plan aimed at shoring up banks to prevent the euro zone debt crisis from spreading.
Chicago Board of Trade December corn increased 1.1 percent to $6.55-1/4 a bushel by 0312 GMT, so far sliding 17 percent from its June peak of near $8 a bushel. Prices have risen 4.3 percent this quarter, after a 9.3 percent drop in the three months to June 30.
December wheat rose for a third day, gaining 1.5 percent to $6.58 a bushel, while November soybeans edged up 0.3 percent to $12.64 a bushel.
"The drought that has existed in the US in the past 12 months is hampering the seeding programme for wheat for 2012," said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia in Sydney.
"There's significant dryness in Argentina. The general perception is that prices have fallen too far, too fast."
The front-month wheat contract has so far lost 26 percent since hitting this year's top of $8.93-1/2 a bushel in February and soybeans are down more than 13 percent from a high of $14.56 in August.
Drought has plagued the US Plains hard red winter wheat region and 80 percent of the Ukraine's winter grain-sowing area.
On Friday, private forecaster Informa Economics pegged 2011 US all-wheat production at 2.044 billion bushels, down from the US Department of Agriculture's estimate of 2.077 billion.
US hard red spring wheat harvest is forecast at 444 million bushels, down from USDA's estimate of 475 million bushels.
SOYBEANS, CORN
Informa cut its estimate for 2011 US corn production to 12.62 billion bushels from 12.711 billion, while raising its US soy harvest prediction to 3.092 billion bushels from 3.061 billion.
The market is awaiting the Sept. 30 quarterly stocks report from the USDA as a gauge of corn demand from the feeding industry, Phillip Futures in Singapore said in a report on Tuesday.
"Since feed accounts for around 40 percent of total corn consumption, any significant changes in behavior from this industry could aggressively move prices," the research house said.
Widespread rumors last week that China would purchase up to 5 million tonnes of corn from the United States and Argentina have gone unconfirmed.
China's emergence as a significant importer would bolster prices at a time when corn supplies are estimated at 16-year lows, and traders say Beijing has to rely on imports of the grain to be used as animal feed because of its rapidly growing meat consumption.
US crude rose $2 a barrel on Tuesday, as concerns over Europe's debt crisis eased and a weaker dollar sparked buying of dollar-denominated assets. Futures were up $1.87 to $82.12 a barrel at 0244 GMT.
US equities rose on Monday as sentiment swung toward hope that European officials would find a way to cut Greece's debt and shore up European banks.
Copyright Reuters, 2011
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