US corn futures rose around 1 percent and soyabean half a percent on Tuesday, extending gains as concerns over dry weather hurting crops in Argentina continued to support the market. Wheat rose 1 percent on strong global demand for US cargoes, including the sale of US wheat to Egypt, and lingering worries about crop-damaging rains in Australia.
"It is follow through strength in the corn and soyabean market after yesterday's gains as investors are talking about dry weather in Argentina which could hit crop production," said Ker Chung Yang, an analyst at Phillip Futures in Singapore. "USDA could lower its forecast for Argentina corn and soyabean crops due to the persistent dry and hot weather." Chicago Board of Trade corn for March delivery rose 1 percent to $6.13 a bushel by 1243 GMT and soyabeans for March gained 0.46 percent to $13.79-1/2 a bushel. March wheat was up 1 percent to $7.75-1/4 a bushel.
The grain markets are awaiting Wednesday's US Agriculture Department crop report, which is expected to show a downward revision in US corn stocks to a 15-year low and a jump in US winter wheat acreage. Minimal weekend rains in the main corn and soyabean production areas of major exporter Argentina offered little relief for stressed crops, although marginal areas received better rains, forecasters said.
Analysts expect the USDA to trim its outlook for South America's corn and soya production, but offered a wide range of estimates for how deep the cuts will be. Strong Chinese export demand for US soyabeans prompted the USDA to trim its forecast of US soyabean ending stocks in each of its last four monthly reports, and that trend should continue with the next edition due on Wednesday.
Still, crop forecasters see a bumper soyabean crop for Brazil again this year, with two of the latest independent estimates zeroing in on a harvest that is just shy of last year's record. Despite dry weather that worried local producers early in the planting season, rains have since normalised and favoured the new crop.
Heavy fund buying in corn and soyabeans on Monday more than offset late index fund selling tied to portfolio rebalancing. Funds bought an estimated net 12,000 to 14,000 CBOT corn contracts on the day and a net 5,000 soyabean contracts, traders said. Traders estimated that funds would sell about 35,000 CBOT corn contracts in the annual rebalancing exercise expected to run through midweek, an outflow of more than $1 billion from the market.
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