CHICAGO: US corn climbed on Monday and soybeans rebounded from two straight losing sessions after hotter-than-expected weekend weather in drought-hit Argentina and southern Brazil deepened concerns over crop losses in those major exporting countries.
Wheat rose for the first time in four sessions and posted the strongest gains in two weeks as spreading -- traders buying Chicago wheat and selling corn and Minneapolis wheat -- and buying ahead of expected index fund rebalancing this week supported prices.
"This is do-or-die week for the moisture down in South America. They still have some double-crop beans and some corn to plant and that would be at risk if it stays on the drier side," said Mark Schultz, chief analyst at Northstar Commodity Investments Co in Minneapolis.
"It was warmer than expected over the weekend and the humidity in central Argentina was low, which hurts the crop faster. The fund rebalancing might give us some support to the wheat market. But the bottom line today is still the South American weather," he said.
Rains were expected in Argentina's main farm areas this week, but climatologists question whether the showers will be enough to revive crops in the world's No. 2 corn exporter and third-largest soybean exporter.
Scattered showers in Brazil's southern grain belt over the next 10 days may not be sufficient to repair damaged crops in the continent's top soybean exporting country, prompting agribusiness consultancy Celeres to cut its corn and soy crop forecasts on Monday.
USDA REPORTS ON TAP
Analysts expect Thursday's US Department of Agriculture report on global supply and demand of farm products to slash forecasts for South American crops and cut estimates of US grain ending stocks for the 2011/12 marketing year.
There has also been a debate over whether the USDA had understated corn used for feed in the United States in the 2011/12 season ending Aug. 31 next year.
Chicago Board of Trade March corn rose 18-1/2 cents, or 2.8 percent, to $6.62 a bushel by 11:12 a.m. CST (1712 GMT). March soybeans gained 35-1/4 cents, or 3 percent, to $12.31-3/4 a bushel.
CBOT March wheat climbed 18-1/4 cents, or 2.9 percent, to $6.43 a bushel despite burdensome global supplies and what are expected to be the largest US winter wheat seedings in three years.
Spreaders bought CBOT wheat and sold corn after wheat on Friday fell to its biggest discount to corn since mid-November. They also bought Chicago wheat and sold Minneapolis wheat, which has been pressured by a weakening cash market, bringing the Minneapolis premium to its narrowest point since mid-August.
CBOT wheat was also supported by short-covering and other buying ahead of portfolio rebalancing by index funds this week.
"Fundamentally there's no reason it should be this strong," said Robert Bresnahan, analyst at CTA Trilateral Inc. "There's money to be put to work here at the beginning of the year."
The annual rebalancing of index commodity funds was slated to start on Monday, likely near the close, and continue through Jan 13.
According to the latest trade estimates, the S&P GSCI and DJ-UBS funds combined may need to buy roughly 28,000 Chicago Board of Trade wheat contracts while selling 26,000 corn. The funds may also buy 16,000 soyoil contracts, 2,600 Kansas City Board of Trade wheat, and sell 600 CBOT soybean contracts.
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