HAMBURG: US spring wheat prices surged to a near two-year high on Tuesday as the condition of the crop was assessed to be well below market expectations, pulling up winter wheat, corn and soybean futures prices in its wake.
Chicago Board of Trade July wheat rose 0.9 percent to $4.38 a bushel at 1035 GMT. US July Minneapolis spring wheat rose 2.5 percent to $6.16 a bushel after hitting $6.21-3/4, the highest spot price since June 30, 2015.
July corn rose 0.6 percent to $3.79-3/4 a bushel, having closed down 2.8 percent on Monday. July soybeans rose 0.2 percent to $9.33-3/4 a bushel.
The crop condition report from the US Department of Agriculture on Monday assessed the condition of the spring wheat crop at 45 percent good-to-excellent, well behind market forecasts for 53 percent.
Last week 55 percent of the crop was rated good-to-excellent and at this time last year it was 79 percent good-to-excellent.
"The US spring wheat conditions in the USDA report on Monday were well below market expectations and this is causing a sharp rise in spring wheat futures today," said Matt Ammermann, commodity risk manager at INTL FCStone. "This strength is also spilling over to winter wheat and into corn and soybeans as the market adds a risk premium."
"When a weather risk is seen in one sector of the grains and soybean complex investment funds tend to add risk premiums into other sectors regardless of whether increased risk is visible."
US soybeans were put by the USDA at 66 percent good-to-excellent, close to forecasts of 69 percent. US corn was at 67 percent-good-to excellent, matching analysts' forecasts.
"If there are issues with spring wheat now you have to ask yourself whether there will be issues with soybeans and corn," Ammermann said. "Right now I think it is too early to make such an assessment on soybean and corn, where the crop ratings were not all that bad."
Forecasts of rain for corn and soybean crops could limit the upside potential for prices.
"Chicago remains in a volatile weather market," Ammermann said. "There are forecasts of more rain in the US Midwest but conditions in some regions there are still far from perfect and continued rain is still needed."
"The Minneapolis spring wheat market can have some pretty violent movements sometimes as it is rather a niche market and is dealing with less liquidity than Chicago wheat."
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