Rally continues into new year as South America supply worries market

PARIS/SINGAPORE: Chicago corn and soybean futures extended a rally to fresh 6-1/2 year highs on Monday as dry crop weather and disruption to exports in South America continued to unsettle investors at a time of brisk Chinese demand.

Wheat also rose to reach a new six-year peak as doubts over Argentine exports added to background worries about available supply after Russian measures to curb its shipments.

The Chicago Board of Trade most-active soybean contract was up 2.4% at $13.42-3/4 a bushel by 1135 GMT, after earlier climbing to its highest since June 2014 at $13.49-1/2.

CBOT corn added 2.1% to $4.94-1/4 a bushel after reaching $4.97-3/4, a level not seen since May 2014.

Wheat gained 1.0% to $6.47 a bushel, after hitting its highest since December 2014 at $6.50-1/4.

"New year, same old issues," Commerzbank said in a note.

"As 2021 begins, it is once again the same concerns about limited supply from South America and strong Chinese demand that are driving up soybean and corn prices."

Argentina's announcement last week of a suspension of corn exports until March, to ensure ample domestic food supply, deepened uncertainty about South American crops as dry weather continued to raise doubts over upcoming harvests.

The news came just after a near three-week strike by Argentina oilseed crushing workers that disrupted supply from the world's largest exporter of soymeal livestock feed.

The return of relatively dry weather in Argentina and southern Brazil has also revived concern about stress for corn and soybean crops, although forecasts pointed to heavier showers next week.

Grain markets have been sensitive to any risks over South American supply as strong Chinese import demand has already absorbed much available soy and corn on the world market.

These factors helped corn, soybean and wheat futures notch up double-digit percentage gains over 2020.

A drop in the dollar to its weakest since April 2018 against other major currencies has also boosted export prospects for US grain.